According to the Insurance Council of New Zealand, reinsurance costs typically only account for about 12% of a home insurance premium.
Around 42% is comprised of taxes and levies, while the remaining 46% covers costs associated with rebuilding a home and covering an insurer’s expenses.
So even if an insurer’s reinsurance costs fell by, say, 10%, Griffiths said that would translate to only a 1.2% saving for a customer.
He said recent severe weather events had bitten insurers hard, because the cost hadn’t reached the threshold at which insurers could tap into their reinsurance cover. So, insurers had to absorb these costs themselves.
“If you’re an NZI or a Vero, and there’s a Canterbury earthquake-type event, you will be well protected from a reinsurance perspective,” Griffiths said.
“But if there is a Bay of Plenty-type event that might affect, say, 4000 homes … most of that will actually be absorbed by their own balance sheets and their own cost bases.”
Furthermore, he said, “Because we’re so seismically exposed, insurers have to have good years between the bad years. So, if they have a big loss every 10 years, those nine years in between have to be quite profitable.”
Griffiths believed the combination of factors meant homeowners wouldn’t see the kinds of declines in premiums experienced by businesses.
On average, home insurance premiums fell by 0.4% between the third and fourth quarters of 2025, according to Statistics New Zealand’s Consumers Price Index.
Meanwhile, premiums rose by 2% when comparing the fourth quarter of 2025 with the fourth quarter of 2024.
During 2023 and 2024, annual premium inflation sat between 20% and 25%.
Commercial insurance premiums vary, but Griffiths said they had fallen by as much as 50% or 60% in some corners.
IAG and Suncorp collected 10% less in premiums from their commercial clients in New Zealand in the six months to December 2025, compared with the same period in 2024.
In its latest half-year results, Suncorp said: “The commercial business continues to be impacted by the soft market cycle, with increased competition, including from offshore capital, and the impact of the economic environment.”
Griffiths said that three years ago, when the reinsurance market was hard, Marsh might have struggled to get enough insurance, from various insurers, for a client wanting a very large sum of cover.
In 2025, on the other hand, it would find itself 40% oversubscribed, with more insurers willing to provide cover than was required.
Businesses have access to a much larger range of insurers around the world that offer specialist products compared with homeowners.
The home insurance market is almost entirely dominated by IAG and Suncorp. NZX-listed insurer Tower also has a small slice of the pie.
Marsh NZ managing director and head of global placement Jon Griffiths. Photo / Marsh
So why has the commercial insurance market softened?
Griffiths explained that when the sector looks profitable, more players enter the market. When there is a greater supply of cover available, prices become suppressed.
“It’s that classic supply and demand dynamic.”
He said the pendulum would swing in the other direction in the event of a big shock or if prices fell to the point insurers weren’t profitable.
However, at the moment, the sector is profitable.
Griffiths said insurers globally had made strong profits over the last two years in the face of a very benign natural catastrophe claims environment.
He believed it was still early days in terms of understanding the impact of the Iran war.
However, he noted conflict in the Middle East wasn’t unexpected. Risks associated with war would have been priced into relevant contracts. Other contracts have exclusions related to war.
“The same impacts that affect the general economy, supply chains and all those things will have an impact on insurance,” Griffiths said.
“The other thing that you’ll see is there will be arguments about definitions of what is war and what is terrorism.”
Jenée Tibshraeny is the Herald’s Wellington business editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.
Stay ahead with the latest market moves, corporate updates, and economic insights by subscribing to our Business newsletter – your essential weekly round-up of all the business news you need.