New Zealand's insurance sector is profitable on the whole and almost all New Zealand insurers are meeting their minimum solvency requirements, says the Reserve Bank of New Zealand in its latest six-monthly Financial Stability Report released last week.
However, solvency ratios have fallen across the main classes of insurers, indicating a reduction in the sector’s capital strength, the report also notes.
Furthermore, the distribution of solvency ratios raises concerns about the ability of some insurers to comfortably meet minimum requirements in the event of an adverse shock. As at March 2018, 12 out of 59 insurers had solvency ratios below 120%, and seven had solvency ratios below 110%. Given that solvency ratios have been volatile in the past, these insurers’ buffers above the minimum requirement are small, says the report.