Insurance Industry 2008 2009

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Insurance Industry 2008 2009 Powered By Docstoc
					the annual insurance industry review 2008 – 2009

Back Row L – R: Gordon Smith, FMG; Christopher Crowder, General Re; John Lyon, Lumley; Martin Kreft, Munich Re;
Ian Foy, IAG; John Balmforth (Vice President), AMI; Terry Jordan, ICNZ; John Lucas, ICNZ.

Front Row L – R: Chris Ryan (Chief Executive), ICNZ; Rob Ryan (President), AIG; Roger Bell, Vero; Martin Stokes, Medical.

Vision The Insurance Council of
New Zealand provides members with
the means to deal with issues that
are more effectively and efficiently
handled on a collective basis. It works
to increase their efficiency, image and
financial strength as they serve their
customers and community.

                                                                concerning trend of New Zealanders reducing their level
                                                                of insurance, and also the issue of under-insurance which
                                                                could create problems for many New Zealanders in the year
                                                                ahead. The Insurance Council is working hard to alert New
                                                                Zealanders to the danger they expose their businesses and
                                                                families to as a result of cutting back on insurance during
                                                                recessionary times.

                                                                During the period under review we have seen a new
                                                                government come into office in New Zealand. While they
                                                                have been immediately challenged by the economy, they
                                                                have also indicated a very strong commitment to many of
                                                                the issues the Insurance Council has been publicly raising.
                                                                In particular the issue of law and order is seen as a high
PRESIDENT’S REPORT 2008/2009                                    priority for the new government, and this is something the
                                                                Insurance Council also believes requires increased scrutiny
The importance of adequate insurance for New Zealanders         to reduce the damage that criminals are doing to our society
has never been more critical than it is in our current times.   and economy generally.

The combination of an economic recession, costs from            Increasingly the insurance industry has been calling for
climate-related events, and the general challenges of an        greater safety on our roads and transportation systems.
increasingly complex society, mean that insurance should        Particularly in the motor vehicle area we are now seeing
be at the top of all business and individuals planning          a greater emphasis on motor vehicle safety and this
during 2009. So far the insurance industry has weathered        is something the insurance industry will be strongly
the economic storm lashing the world with a great degree        supporting.
of success.
                                                                In the area of regulation we have seen the introduction of
The key issue looking forward will be the insurance             the Financial Product Providers’ Registration and Disputes
industry’s ability to reserve adequately for the combined       Resolutions Bill and also the introduction of the Financial
challenges of reduced investment income, increased              Advisers’ Act. Both of these are likely to increase regulation
claims for weather-related events, and increased                on the industry and hopefully protect our customers from
compliance costs for regulation.                                any failures by companies in the insurance sector. While
                                                                this regulation is welcomed, it should be noted that the
The recent year has seen the beginning of a hardening of        insurance sector in New Zealand has remained strong and
the insurance market, particularly in the Personal Lines        continued to deliver fully to its customers while other areas
and Motor areas of New Zealanders. While rates have             of the finance industry have struggled.
not increased as dramatically in the commercial sector,
the message the industry will need to get across to New         We are now working towards the introduction of Prudential
Zealanders during 2009 is that New Zealand is now a more        Regulation through the Reserve Bank, with developing
costly risk than two or three years ago, and premiums are       Prudential Regulation Legislation including solvency and
likely to continue rising for very sensible reasons.            capital adequacy models, and also the introduction of the
                                                                Insurance Contracts Act. The Insurance Council will be
Insurance Council Members’ customers have been very             representing the insurance industry’s general support for
understanding in the pressures placed on the insurance          this legislation, whilst addressing specific issues that may
sector. They have understood that insurance must                be of greater advantage to our customers.
follow other increases like power and property rates, but
the insurance industry has been at pains to explain the         The Council has updated its website to assist New
challenges we are now facing. We believe we have seen           Zealanders with information they may require when
                                                                insuring. In addition the Council has been actively involved
some success in this area.
                                                                in creating an industry-branding project which will explain
The economic impact on insurers has seen a reduction            to New Zealanders the enormous value that the insurance
in investment income. It has seen the beginning of a            industry continues to add to our economy and society.

    Education issues remain high for us in attracting young             In recent years we have increased the membership of
    people into the industry, and this continues to be a priority.      the Insurance Council due to the benefits for insurance
                                                                        companies’ customers being provided by the Council
    In the finance area the development of the IRFS Phase 2             and its Executive. I thank the Executive for their work
    International Accounting Standard continues, along with             during 2008. The Insurance Council retains its proudly
    our work with the Actuarial and Tax industry.                       held view that we present to New Zealanders some of the
                                                                        great benefits that can be obtained from a well-regulated,
    The insurance industry will continue working with
                                                                        well-run and highly competitive insurance industry. An
    communities and encouraging them to be prepared to
                                                                        industry that is now providing products to New Zealanders
    cope and to recover from the increasing effect of climate-
                                                                        that protect their families, loved ones, businesses, homes
    related events on our nation.
                                                                        and their communities.
    Overall the year in review has been challenging, but
                                                                        It is with great pleasure that I have been able to contribute
                                                                        to the work of my industry colleagues in the Insurance
    I would like to thank the Committees and Working                    Council during the reporting period, and look forward to
    Groups represented within the Insurance Council. The                continuing the contribution that we make to New Zealand
    hard work of individual members continues to add value              society and economy.
    to our customers.

    To my colleagues on the Board I thank them for the
    contribution they have made during a demanding year, and
    in particular would note the contributions of Rieny Marck,          John Balmforth
    Nick Hawkins and Rob Ryan, who all moved on to new                  President
    positions during the year in review.                                Insurance Council of New Zealand



                                                              Chief Executive
                                                               Chris Ryan

                   Insurance Manager                                                           Manager, Finance & Regulation
                       John Lucas                                                                      Terry Jordan

                                                    Administration & Support Staff
                                                 Madeleine Mitchell    Sharon Baldwin



                    Employment                                                                personal
      Commercial                    Finance       liability       Marine          Motor                     Regulatory
                    & Education                                                                lines
      Committee                    Committee     Committee       Committee      Committee                   Committee
                    Committee                                                                Committee


                                                     FoR A Full lIST oF WoRkINg gRoupS, SEE pAgE 9 oF ThIS REpoRT


Major submissions to government presented on:

Compulsory Third party Vehicle Insurance                      Vehicle Equipment (Immobilisers) Rule 32017/3
                                                              – green Draft
Retirement Villages Code of practice 2008 Section 21
– Fire and Accidental Damage                                  Financial Service provider (Registration and Disputes
                                                              Resolution) Bill
Vehicle Equipment (Immobilisers) Amendment [2008]
– Rule 32017/3                                                Financial Advisers Bill

land Transport (Road user) Rule Amendment [2009]              Reserve Bank Insurance prudential Regulation
– Rule 61001/4                                                discussion paper


Finance Committee Seminar                                     Insurance law Association – liability Discussion
                                                              group Created
Members’ Information Website
                                                              policy input on Wellington City Councils Earthquake
Financial Service providers (Registration & Disputes          prone Building policy Review
Resolution) Bill policy Developed
                                                              policy input on Fire protection Association Water
Casualty Surveyor Cost Recovery Charter Created               Supply Working group
Fire Service levies on Margins Clauses Confirmed              Submission to IpENZ on their Draft Coolstore
ICNZ Material Damage Advisory Core Wording                    Design guide
– Margins Clause Confirmed                                    Fire Service levies Compliance guide updates
large loss reports for Commercial, Marine, Motor              promotion of Marine Insurance as a Career (ICNZ)
and personal lines Created                                    Website
liaison with the Fire Service about Fire Service levies on
Inbound Student Travel policies

Statistical Information provided to the International union
of Marine Insurers

knock for knock Agreement updated                                                                         Key issues for
Insurer Disputes Tribunal user guide – (Vehicle
                                                                                                          2009 will be under-
Assessment Information guide) – Development                                                               insurance, disaster
                                                                                                          preparedness and
ICNZ Building Consents Working group Created                                                              recovery, and the
Weather-related losses – Data Collection and Media
                                                                                                          contribution of
Commentaries provided                                                                                     insurance.

    liaison with New Zealand police concerning
    Memorandum of understanding & Vehicle Crime Initiatives

    Rental Vehicle loss of use Calculation guide update

    policy input to Ministry of Transport Vehicle Standards
    Advisory Committee

    Motor Total loss Recovery guideline Amendment

    policy input to IRD on Tax Deductibility of Risk Margins
    included in the outstanding Claims Reserve

    Anti Money laundering and Countering Financing of
    Terrorism Bill reviewed

    policy input to EQC on finding a solution to the problem
    of insurers having to report levies collected within 10 days
    of month end

    liaison with ANZIIF and Industry hR Managers on
    Insurance Education Issues

    Representation on ANZIIF Branch Executive Committee

    Industry Branding project to highlight general insurance as
    a career of choice created

    2008 industry remuneration survey completed

    Representation on ETITo financial services working group,
    preparing qualifications for the financial services sector
                                                                   ICR upgraded, with enhanced search capacity and
    Review of the Standstill Agreement completed                   improved data-match accuracy

    Development of industry guidelines for cases of dual           Analysis of discussion paper on Insurance Contracts
    insurance refunds commenced                                    Agency and Assignment

                                                                   Analysis of discussion paper on Insurance prudential

                                                                   Development of insurance fraud initiatives, including a
                                                                   dedicated fraud section on ICNZ website

                                                                   Extensive media work on image, role and importance of

                                                                   ongoing involvement with government Departments and
                                                                   political representatives

                                                                   Communication of Council activities and new initiatives to
                                                                   members and industry colleagues

                                                             standards across the insurance sector and promoted
                                                             appropriate self-regulation and regulation to government.
                                                             We have also promoted private sector provision of the
                                                             insurance sector’s services within a well-regulated and
                                                             competitive environment.

                                                             The insurance industry has adapted to a changing
                                                             economic scene, and also a new elected government for
                                                             New Zealand. We have taken specific initiatives on behalf
                                                             of the Insurance Council members promoting a branding
                                                             project to explain the role of the industry to prospective
                                                             employees and also to our customers and colleagues.

                                                             The Insurance Council established a Regulatory Committee
                                                             to add to the work programme. The Regulatory Committee
                                                             made significant submissions on the new Prudential
2008/2009                                                    Regulation under the financial reforms begun by the last
                                                             government and continued by the current government.
The Insurance Council has continued to develop the
direction set down by members during the 2008/2009           We continue to work with colleagues in the disaster area
reporting period. Our membership has continued to grow       and raising awareness of communities of the risk of
with additional members being attracted to the Insurance     under- and non-insurance.
Council in the last two years, and the objectives set down
by the Board and Membership have continued to be             The Insurance Council has worked extensively with the
developed as our economy and society change.                 broker community, and also our other colleagues in the
                                                             industry – in loss adjusting, finance and law, taxation and
We have been charged with representing members’              regulation.
interests in both domestic and international areas,
representing the general insurance sector to government      The strong scrutiny the Insurance Council Board applies
and to the community. We have a responsibility to            to the working of the Council Executive ensures that our
communicate to the industry the needs and expectations       administration procedures are thoroughly audited and
of our government and our community, and to explain the      fully compliant with all commercial and government
role of the insurance industry and present the best image    requirements. The Insurance Council remains on a
we can to our customers and community.                       strong financial footing with increased membership and
                                                             a stable staff.
A key area of work undertaken by the Insurance Council
during the reporting period has been promoting               The standard of appointments to our Standing
community awareness to the role and the benefits             Committees and Working Groups is at the very highest
of insurance. We have worked on improving service            level, and I would like to thank all members participating

                                                                                                 We have a responsibility
                                                                                                 to communicate to the
                                                                                                 industry the needs and
                                                                                                 expectations of our
                                                                                                 government and our

        and contributing to the work of our Standing Committees         To my fellow colleagues, I also thank them for their
        and Working Groups.                                             contribution, sometimes beyond the call of duty, to assist
                                                                        with our members and customers.
        Looking forward to 2009, we have a comprehensive work
        programme now in place which includes adapting to               Our Achievements List has been updated for 2008 and
        the new regulatory and economic environment, building           appears on pages 3 and 4. Our reporting process ensures
        relationships with the new government and regulatory            that detailed actions are recorded to confirm that we
        agencies. We will continue to address the issues of Fire        are specific on the outcomes we are presenting to the
        Service funding, under-insurance, disaster preparedness         members.
        and recovery, and the contribution of insurance.
                                                                        I continue to take great pleasure in the success of
        The image of the industry should be enhanced through            the Insurance Council, and look forward to working
        the work of the Branding Committee, and we will be              to enhance the contribution insurance makes to our
        looking at lifting the content of the website to ensure that    community during 2009.
        New Zealanders are able to access the website through
        the public site, and also there will be significant technical
        documents attached to the members’ site now redeveloped.

        My thanks to the Board of the Insurance Council during
        the reporting period, in particular to the current President
        John Balmforth who stepped into the role as President           Christopher Ryan
        following the transfer of the previous incumbents to            Chief Executive
        different employment positions.                                 Insurance Council of New Zealand

      The threat
      of flooding
   remains high.
     As a nation
     we must be
 able to recover
through the use
    of insurance.


All Business 12 months to September
                          year-End             2004               2005            2006            2007            2008
    gross Written premium ($)         2,843,300,310      2,991,934,639   3,011,273,374   3,099,077,385   3,260,456,648
      Net Written premium ($)         2,355,817,527      2,533,153,469   2,564,171,240   2,657,163,693   2,807,667,691
       Net Earned premium ($)         2,283,372,355      2,465,493,771   2,543,899,069   2,608,081,917   2,747,509,546
             Claims Incurred ($)      1,435,993,453      1,505,345,266   1,609,672,399   1,736,503,436   1,880,923,174
                   loss Ratio (%)           62.89%             61.05%          63.28%          66.58%          68.46%
   Business Costs (Staff etc) ($)      631,827,986        695,741,650     762,889,565     825,984,278     897,685,308
            Combined Ratio (%)              90.56%             89.28%          93.26%          98.25%         101.13%

Commercial Material Damage and Business Interruption 12 months to September
                          year-End             2004               2005            2006            2007            2008
    gross Written premium ($)          467,729,535        450,024,879     434,899,307     424,814,574     441,340,110
      Net Written premium ($)          277,570,590        269,227,384     250,377,553     248,966,425     277,244,142
       Net Earned premium ($)          276,852,324        264,419,695     259,798,435     249,854,108     270,404,011
             Claims Incurred ($)       175,616,248        150,505,061     147,371,640     175,041,037     185,283,249
                   loss Ratio (%)           63.43%             56.92%          56.73%          70.06%          68.52%

Domestic Buildings and Contents 12 months to September
                          year-End             2004               2005            2006            2007            2008
    gross Written premium ($)          567,171,746        612,693,480     650,460,420     703,171,694     766,231,827
      Net Written premium ($)          526,273,977        567,460,544     613,482,598     662,679,754     714,632,555
       Net Earned premium ($)          515,714,410        556,581,009     599,295,472     640,728,100     687,754,814
             Claims Incurred ($)       395,537,263        417,962,593     477,339,229     535,037,934     566,260,572
                   loss Ratio (%)           76.70%             75.09%          79.65%          83.50%          82.33%

Motor Commercial and Private 12 months to September
                          year-End             2004               2005            2006            2007            2008
    gross Written premium ($)         1,039,300,352      1,080,040,406   1,089,367,152   1,108,091,872   1,159,380,800
      Net Written premium ($)          999,743,136       1,048,797,392   1,057,591,852   1,080,683,184   1,128,103,360
       Net Earned premium ($)          963,820,423       1,027,933,037   1,061,862,826   1,077,998,789   1,104,655,954
             Claims Incurred ($)       673,105,579        711,919,892     739,416,181     770,080,686     813,957,780
                   loss Ratio (%)           69.84%             69.26%          69.63%          71.44%          73.68%

    Marine hull and Cargo 12 months to September
                            year-End                 2004               2005              2006            2007             2008
        gross Written premium ($)           111,397,160       111,855,941         105,606,534     107,516,864      113,768,514
          Net Written premium ($)            78,733,731         79,017,420         79,456,492      79,129,286       94,679,961
          Net Earned premium ($)             79,753,409         76,769,224         76,251,616      77,735,860       90,657,762
                Claims Incurred ($)          34,064,514         37,700,349         50,073,714      51,332,230       61,080,313
                     loss Ratio (%)                42.71%          49.11%              65.67%          66.03%           67.37%

    Liability Professional & Defamation, Directors & Officers and Public Product & Other 12 months to September
                            year-End                 2004               2005              2006            2007             2008
        gross Written premium ($)           229,924,380       249,505,862         246,227,459     252,485,737      267,149,616
          Net Written premium ($)           183,692,733       212,258,744         209,527,470     219,954,010      234,968,804
          Net Earned premium ($)            173,920,406       208,768,286         208,852,711     212,870,263      236,853,174
                Claims Incurred ($)          63,428,901         78,402,089         79,736,304      70,552,528       91,666,012
                     loss Ratio (%)                36.47%          37.55%              38.18%          33.14%           38.70%

    Earthquake Domestic, Commercial M.D., Business Interruption and Marine Cargo 12 months to September
                            year-End                 2004               2005              2006            2007             2008
        gross Written premium ($)           207,596,836       205,966,145         209,800,798     212,597,837      206,530,977
          Net Written premium ($)           115,756,806       117,868,652         116,064,812     114,429,759       95,928,127
          Net Earned premium ($)            109,184,229       121,644,727         112,504,953     111,343,908      100,074,065
                Claims Incurred ($)           2,539,356          2,011,282          1,347,519        2,006,587      16,736,697
                     loss Ratio (%)                 2.33%           1.65%               1.19%           1.80%           16.72%

    Other Personal Accident,Travel, Livestock and Other 12 months to September
                            year-End                 2004               2005              2006            2007             2008
        gross Written premium ($)           220,180,301       281,847,924         274,911,704     290,398,807      306,054,804
          Net Written premium ($)           174,046,554       238,553,329         237,670,464     251,321,275      262,110,742
          Net Earned premium ($)            164,127,154       209,377,799         225,333,056     237,550,889      257,109,766
                Claims Incurred ($)          91,701,592       106,844,003         114,387,824     132,452,434      145,938,551
                     loss Ratio (%)                55.87%          51.03%              50.76%          55.76%           56.76%

    Gross Written Premiums of Business Classes 12 months to September
                            year-End                 2004               2005              2006            2007             2008
                    Commercial ($)          467,729,535       450,024,879         434,899,307     424,814,574      441,340,110
                      Domestic ($)          567,171,746       612,693,480         650,460,420     703,171,694      766,231,827
                         Motor ($)        1,039,300,352      1,080,040,406       1,089,367,152   1,108,091,872    1,159,380,800
                         Marine ($)         111,397,160       111,855,941         105,606,534     107,516,864      113,768,514
                        liability ($)       229,924,380       249,505,862         246,227,459     252,485,737      267,149,616
                    Earthquake ($)          207,596,836       205,966,145         209,800,798     212,597,837      206,530,977
                          other ($)         220,180,301       281,847,924         274,911,704     290,398,807      306,054,804
                           Total ($)      2,843,300,310      2,991,934,639       3,011,273,374   3,099,077,385    3,260,456,648

                             ThE INSURANCE COUNCIL OF NEW ZEALAND INC
Nick hawkins
IAg [resigned June 08]
                             STANDING COMMITTEES

Rob Ryan
AIg [resigned January 09]    COMMERCIAL COMMITTEE                  Debbie Wilson         ACE          PERSONAL LINES COMMITTEE

John Balmforth               Nathan Barrett           FMg          Graeme Ross           Medical      Peter Birmingham          Medical
AMI                          Kane Butler              ACE          Alister Smith         lumley       Richard Godman            Vero
                             Graham Byrnes            IAg                                             Tony howie                Ansvar
                                                                   LIABILITy COMMITTEE
                             Mike Cole                AIg                                             Michael Koopmans          FMg
                                                                   heather Bailey        Vero
                             Brian Coleman            Allianz                                         Paul Lightfoot            China
BOARD                                                              Jeremy Batchelor      IAg
                             Mark Cross               Vero                                            John McSweeney            AMI
MEMBERS                                                            Clive Davidson        lumley
                             Deborah Cruickshank      Munich Re                                       Kevin Meekan              Tower
Roger Bell                                                         Mark Downes           ACE
Vero                         Rod Denmead              lumley                                          John O’hara               IAg
                                                                   Karl Kemp             Allianz
                             Roger Penrose            Ansvar                                          Julie Smith               lumley
Ian Foy                                                            Andrew Pook           Zurich
IAg [appointed June 08]      Dean Sewell              Zurich                                          John Walker               Allianz
                                                                   Jeremy Scott-Mackenzie AIg
Martin Kreft                 Payal Sharma             China
                                                                   Payal Sharma          China
Munich Re                                                                                             REGULATORy COMMITTEE
                             John Stubbs              general Re
                                                                   David Sutcliffe       general Re
John Lyon                                                                                             Eugene Elisara            AIg
lumley [appointed June 08]   EMPLOyMENT &                                                             David Nicolson            AMI
                                                                   MARINE COMMITTEE
                             EDUCATION COMMITTEE
Christopher Crowder                                                                                   Lisa Murray               FMg
                                                                   Keith Auld            Munich Re
general Re                   Graham Bunkall           AIg
                                                                                                      Tim hurdle                IAg
                                                                   Christopher Barrett   Sunderland
Martin Stokes                Denise Deegan            lumley
                                                                   Peter Cooper          lumley       Scott Galloway            lloyd’s
Medical Insurance
                             Tansey McLoughlin        Tower
                                                                   John McKelvie         Vero         Greg Malcolm              Mitsui
Gordon Smith                 Fiona Michel             IAg
FMg                                                                Mick Miller           IAg          Martin Kreft              Munich Re
                             Barry Mitchell           AMI
                                                                   Chris Nixon           AIg          Chris Kennedy             Sunderland
                             Simone Nelson            ACE
                                                                   Andrew Scrivens       Zurich       John Lyon                 lumley
                             Natasha Poloai           FMg
                                                                   Payal Sharma          China        Avy Judelson              Tower
                             Alison Shackell          Vero
                                                                                                      Pat halloran              Combined
                             Ross McMillan            Medical      MOTOR COMMITTEE
                                                                                                      Brendon Ryan              lumley
                                                                   Mike Clapp            Tower
                                                                                                      Jenine Briggs             promina
                             FINANCE COMMITTEE
                                                                   Paul Liddle           IAg
                                                                                                      Suzanne Wolton            AA
                             Mary-Jane Daly           IAg          Paul Lightfoot        China
                             Tim Felton               Vero         Graeme Lynskey        Vero
                             Ivan Findlay             AIg          Chris O’Connor        Ansvar
                             Katherine Griffiths      Allianz      Sonya Olsen           FMg
                             Dave Kibblewhite         FMg          Kevin Paxton          Zurich
                             David Nicolson           AMI          Tony Rogers           AMI
                             Michelle Clark           Tower        Ian Taylor            lumley

                             WORKING GROUPS

                             Brokers liaison                       Fire Service levy                  International Accounting Standards
                             Building Consents                     Fraud                              International Tax
                             Claims Managers                       heavy Vehicle                      loss Adjusters
                             Engineering Discussion                ICR                                Motor Assessors
                             Fire Sprinkler                        ICR user                           police liaison
Insurance Council members
as at January 2009

ACE Insurance
Allianz New Zealand
AIG New Zealand
AMI Insurance
Ansvar Insurance
China Insurance
Civic Assurance
Combined Insurance
Farmers’ Mutual Group
General Re
Guild Insurance Limited
IAG New Zealand
Lumley General Insurance
Medical Insurance Society
Mitsui Sumitomo Insurance
Munich Re
Pacific International Insurance
Simply Insurance New Zealand
Southern Cross Travel Insurance
Sunderland Marine
Swiss Re
Tower Insurance
Zurich New Zealand

Insurance Council
of New Zealand
Level 7
Perpetual Trust house
111-115 Customhouse Quay
P O Box 474
+64 4 472 5230

Description: Insurance Industry 2008 2009 document sample