CBA: International Insurer Flows Unlikely To Give Meaningful Support In ‘23

CBA note that “the recent natural disasters in New Zealand have caused widespread damage. The country is still under a state of emergency.”

• “The New Zealand government has estimated the damage is around $NZ13bn. This estimate is tentative and could change significantly as more information becomes available.”
• “It will likely take months for insurers to assess individual claims, organise repairs and replacement, and settle claims. We expect claims settlement to step up from Q223 at the earliest. We would not be surprised if the settlement of some claims spills over into 2024.”
• “Another aspect is coverage. Not everybody is fully insured. Settled claims will be less than the damage caused. Governments may step in to fill some of the gap between damage and settlement.”
• “Our ASB colleagues expect insurance claims to be settled much quicker than during the Canterbury earthquakes. Aftershocks are not an issue this time.”
• “However, settlement and rebuild is unlikely to be quick. It may be difficult to find enough construction workers for the rebuild. New Zealand’s labour market is very tight. The unemployment rate was 3.4% in Q422 compared to around 6.0% at the time of the Canterbury earthquakes.”
• “In addition, global supply chain issues may delay the importation of household, office and factory equipment.”
• “Reinsurers are typically based in Europe. Foreign capital will flow into New Zealand later this year as claims are settled. The capital inflows may support NZD. But the boost to NZD is unlikely to be large in our judgement.”