More pressure to come on disability contracts
A shrinking market combined with problems with disability income contracts has forced Swiss Re to close its New Zealand office.
Wednesday, January 24th 2001, 5:43PM
A shrinking life insurance market and problems with disability income insurance have forced re-insurers Swiss Re to close its Wellington office and relocate to Sydney.
Swiss Re's New Zealand boss Duncan Lord says the number of life insurance companies operating in New Zealand has shrunk so much in the past 10 years that it is now no longer viable to have an office in this country.
The latest corporate manoeuvre, the merger of Sovereign and Colonial, has "added fuel to the fire", rather than been the "straw that broke the camel's back," he says.
The other problem is that life companies have been writing disability contracts that have been unsustainable, and there have been some losses.
While the problem isn't as big as that experienced in Australia or the United States it is still a problem.
The move has prompted speculation that the company will no longer accept new reinsurance business on disability income.
Lord says that's not true, but he does say any reinsurance will have to be done on Swiss Re's terms.
That means there could be further upward pressure on premiums, or, as has happened overseas, there will be fewer benefits with disability contracts.
Lord says there are still many contracts in force "that probably aren't sustainable in the long term."
He says re-insurers can do certain things to help the situation (such as encouraging better claims management), but it is up to the life offices to make changes.
Some companies have been very slow to make changes, and have suffered losses.
Currently Swiss Re has about nine staff in Wellington. After the relocation one there will be one, part-timer working from home.
Lord says Swiss Re is also closing its Melbourne office and moving those staff to Sydney.
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