Best's Market Segment Report: AM Best Assigns Stable Outlook on New Zealand's Life Insurance Segment

AM Best

AM Best is assigning a stable outlook on the New Zealand life insurance segment, citing robust capital adequacy, in addition to improved market discipline driven by regulatory refinements designed to strengthen financial conduct.

The Best’s Market Segment Report, “Market Segment Outlook: New Zealand Life Insurance,” also notes technology investments within the segment have led to operational efficiencies and product innovation. Countervailing factors for the life segment include New Zealand’s subdued premium growth amid challenging economic conditions, elevated compliance costs and heightened data security and cyber risk.

New Zealand’s life insurers are generally well-capitalised and supported by a conservative capital management strategy. With the interim solvency standards taking effect on 1 January 2023, life insurers opted to hold a capital buffer to ensure their capital adequacy remains appropriate.

“Although the shift to the new standard resulted in some recalibration of reported solvency ratios, the underlying financial strength of the country’s life insurance segment generally remains robust,” said Victoria Ohorodnyk, director and head of analytics for Southeast Asia, Australia and New Zealand, AM Best.

According to the report, life insurers’ declining profits in recent periods have been driven by both higher claims costs and lower premium revenues, and have continued to pressure earnings. These challenges have necessitated strategic cost controls and efficiency improvements, which remain critical to maintaining profitability.

Life insurers have been investing in technology to improve their operational efficiency to better address consumer demand. Digital underwriting tools and online application systems are being adopted by a growing number of insurers to enhance the user experience. “More advanced data infrastructure allows insures to provide highly flexible and tailored insurance products/coverages,” said Yi Ding, associate director, AM Best. “Given how rapidly digital technology has been developing, life insurers will likely continue to invest heavily in insurtech and grow their direct distribution channels.”

To access the full copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=348570.

AM Best will discuss New Zealand’s insurance industry in further detail at its Insurance Market Briefing – Auckland, which will take place at 4:00 p.m. (GMT+13) on Monday, 11 November 2024, at Level 2/204 Quay Street, Auckland. For more information about the conference, please visit the event page and agenda.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2024 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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Yi Ding
Associate Director, Analytics
+65 6303 5021
yi.ding@ambest.com

Victoria Ohorodnyk
Director, Head of Analytics
+65 6303 5020
victoria.ohorodnyk@ambest.com

Christopher Sharkey
Associate Director, Public Relations
+1 908 882 2310
christopher.sharkey@ambest.com

Cynthia Ang
Senior Industry Research Analyst
+65 6303 5026
cynthia.ang@ambest.com