The Reserve Bank (RBNZ) says premiums for residential dwelling insurance have “significantly outstripped” the general rate of inflation over the last decade.
In the central bank’s view, this may lead to people being unable to afford home insurance in the future.
The RBNZ released an excerpt on insurance availability and risk-based pricing on Monday from its much-anticipated Financial Stability Report (FSR) which is being fully released later this week.
The FSR is published twice a year and provides the central bank’s analysis of the strength and effectiveness of New Zealand’s financial system.
The RBNZ’s release of its insurance excerpt from the FSR pointed to factors like rising construction cost inflation and higher reinsurance costs as reinsurers adjust their views of NZ risks being behind the sprint in premiums.
The central bank expects insurance for high-risk properties to gradually become less available and says some owners may find insurance “increasingly unaffordable”.
“Insurers may begin to make coverage of some risks optional as risk-based pricing becomes more commonplace. Rising premiums may also lead to customers choosing to underinsure (with higher…
