The initial insured losses for the recent floods in the North Island of New Zealand are estimated at NZ$1.65 billion ($1.02 billion), according to PERILS, the independent Zurich-based organization that provides industry-wide catastrophe insurance data.

Losses incurred so far in the current year from the New Zealand floods and Cyclone Gabrielle, which hit the nation a few days afterward, are expected to surpass the total of all weather-related claims in 2022, said GlobalData in a separate commentary on the storms.

From Jan. 27 to Feb. 2, 2023, extreme rainfall caused severe inundation across the greater Auckland Region and surrounding areas on the North Island of New Zealand, resulting in the costliest weather event for the region’s insurance industry to date, PERILS said. (Cyclone Gabrielle hit New Zealand’s North Island and the top of the South Island on Feb. 12-16.)

The flooding event was fueled by extraordinarily warm and humid weather throughout the summer that culminated in record-breaking rainstorms on Jan. 27 and Feb. 1, PERILS added, noting that these storms caused intense pluvial, fluvial and sewage flooding that affected a large number of insured properties. Four people died in the event and several thousands were evacuated following a rare red-alert state of emergency declaration.

“This event is unprecedented, being the largest weather-related insurance industry loss historically for New Zealand. It is the third-largest cat event for the sector, only surpassed by the Canterbury Earthquakes of 2010-2011 and the Kaikoura Earthquake of 2016,” said Darryl Pidcock, head of PERILS Asia-Pacific.

“In addition, Cyclone Gabrielle passed through the North Island region only 10 days after the North Island Floods, causing considerable damage and leaving many people homeless. For two such extreme weather events to occur within such a short period is unprecedented in New Zealand’s recent history and will test the industry’s existing understanding of these perils,” he added.

In line with the PERILS’ event definition for New Zealand, its estimate of NZ$1.65 billion in insured losses covers the property line of business.

As a result of the massive damage caused by Cyclone Gabrielle and the Auckland floods, property insurers in New Zealand will see a severe impact on their profitability, said GlobalData, the London-based platform that provides data analytics and expert analysis about global industries, in a separate release issued on Feb. 22.

The insured losses from the cyclone and floods “are expected to surpass the total of all weather-related claims in 2022, which was the highest to date,” commented Chandini Sharma, Insurance Analyst at GlobalData.

In total, around 48,000 claims have been lodged for the flooding event, which includes over 36,000 home and contents claims valued at around NZ$565 million, 3,800 commercial claims valued at around NZ$320 million and 7,500 motor claims worth NZ$109 million, said the New Zealand Insurance Council in a March 6 statement.

According to GlobalData’s Global Insurance Database, the loss ratio for the property insurance line increased from 59.4 in 2020 to 74.0 in 2021 due to higher natural catastrophic claims and is expected to jump significantly in FY2022-2023 to reach 156.5.

Pidcock at PERILS noted that this is the first New Zealand industry event loss to be reported by PERILS since it started covering the market in 2019. An updated estimate of the market loss from the North Island Floods will be made available by PERILS on May 2, 2023, three months after the event end date.

Source: PERILS and GlobalData

Photograph: Vehicles are stranded by flood water in Auckland on Jan 28, 2023. Record levels of rainfall pounded New Zealand’s largest city, causing widespread disruption. (Dean Purcell/New Zealand Herald via AP)