Insurers get more competitive
A London insurance broker with close links to Lloyd's says Australasian insurers have come back offering "cheaper premiums", making the Christchurch market more competitive.
Ropner Insurance Services managing director Alan Rixon, on his fifth trip to the earthquake-damaged city, said London insurers remained interested in helping cover the large Christchurch rebuild projects.
However, a slower than expected start to the projects and the more competitive environment in Christchurch meant he was busier in the North Island in terms of writing new business.
Rixon, an independent Lloyd's of London insurance broker, says the underwriting industry has seen significant changes since the 2010 and 2011 earthquakes.
So far, demand for insurance underwriting in Christchurch for Lloyd's syndicates had been less than earlier thought, particularly for larger commercial projects yet to get started, he said.
"Obviously, the [local] market has got a bit softer . . . The capacity seems to have freed up a bit . . .
"The local carriers [like IAG, Vero and QBE] seem to be coming back in again with cheaper premiums . . . They're not as expensive as the London prices, because London will come in when they see a shortage.
"There's a marked reluctance to drop rates in London," he said.
Property developer Paul Kelly agreed with Rixon's view that the insurance market had become more competitive again. For instance, on a series of building projects along Moorhouse Ave, now fully tenanted, prices had initially soared as a result of the quakes.
Initially, on the build at No 76, he had arranged "local" contract works cover for a six-month construction for $7000 after the September 2010 quake. But after the February 2011 quakes, construction cover at No 72 and No 74 had to be sourced offshore. The cost rose abruptly to $163,000 for each site.
On a more recent Moorhouse Ave site, construction cover had reduced to $80,000, and he estimated construction cover for the latest planned project at 100 Moorhouse Ave would likely fall to much closer to $7000.
Central city developer Lindsay O'Donnell said the insurance market remained "fragmented". There were signs that contract works cover was coming down, but existing commercial building insurance "is continuing to climb . . . insurance companies are still trying to recoup losses, really".
Rixon works with Christchurch-based loss adjuster and insurance adviser Peter MacLeod to keep in contact with rebuild insurance opportunities.
Since his last trip in November, he did not get the sense much had changed on larger projects. Construction insurance would be needed only when such buildings started. "It's a bit slow there."
Rixon said he had found more insurance opportunities in the North Island in the last six months.
On an older commercial Wellington property worth $30 million or more, Australasian insurers might want to take only 50, 60 or 70 per cent of the cover, with a Lloyd's syndicate stepping in for the balance, Rixon said.
In New Zealand, Australasian insurers were now unwilling to insure buildings pre-dating 1935. Again, London insurers would step in to provide insurance at the right terms.
In Christchurch, Rixon has arranged cover for the Latimer Lodge in Latimer Square for a $20m rebuild.
North of Wellington and in Wairarapa, he has arranged cover for old pubs in towns such as Greytown, Featherston and Foxton, as well as an Auckland resort.