WPIA

1. WPIA Earthquake: Implications and Complications “Hindsight makes genuis’s out of everyone!” Quote by a person who always speaks after the event

2. Agenda • Overview • The Insurance model & Insurance Lessons • Investing & Protecting that Investment

7. Tokyo

9. Cyclone Yasi

11. Brisbane Floods

13. Perth Storm

15. Victorian Bushfires 2009

16. Melbourne Storm 2010

18. Christchurch

25. Asia Pacific Events Cumulative Cost (NZD): $ 34.07+ Billion Cumulative Cost (NZD): $ 19.37+ Billion Cumulative Cost (NZD): $ 13.37 Billion Cumulative Cost (NZD): $ 3.77 Billion Cumulative Cost (NZD): $ 1.25 Billion Cumulative Cost (NZD): $ 52 - 92 Billion Cumulative Cost (NZD): $ 2.45 Billion Cumulative Cost (NZD): $ 22.07+ Billion Cumulative Cost (NZD): $ 36+ Billion 2011: Tokyo , Earthquake, $16.8 - 40 Billion 2011: Queensland, Cyclone, $0.9 Billion 2011: Brisbane, Flood, $2.7 Billion 2010: Maule, Earthquake, $9.6 Billion 2010: Perth, Hail, $1.32 Billion 2010: Christchurch, Earthquake, $6+ Billion 2009: Victoria, Bushfires, $1.25 Billion 2011: Christchurch, Earthquake, $12+ Billion 2010: Melbourne, Hail, $1.2 Billion

26. New Zealand Events Cumulative Cost (NZD): $ 0.25 Million Cumulative Cost (NZD): $ 12.75 Million Cumulative Cost (NZD): $ 62.05 Million Cumulative Cost (NZD): $ 67.55 Million Cumulative Cost (NZD): $ 68.75 Million Cumulative Cost (NZD): $ 92.65 Million 2010: Northland/Coromandel/Eastern BOP, Flooding , $12.5 million 2011: Mid – Upper North Island, Flooding & storms, $23.9 million (Provisional) 2010: Gisborne, Flooding , $0.25 million 2010: North & South Islands, Flooding , $5.5 million 2010: Wellington, Thunderstorms, $1.2 million 2010: Southland, Storms, $49.3 million Data Source: Insurance Council of New Zealand

27. Reinsurance – a basic guide Insurance for Insurers • Buy cover to minimise exposure / protect balance sheet • Risk level • Catastrophe Retention (Insurer’s deductible or excess) Reinstatements (industry requirement) Cost of Reinstatements Future Reinsurance renewals • Significant price increases • Significant retention (excess) increases

28. An Insurers View…… The landscape has changed..... The dust is still to settle.....the earth is still moving Two major catastrophes in 6 months (most costly insurance events in our history) Size of NZ Market Dominated by Australian ownership Global Reinsurance Market (Storms, Earthquakes, Tsunami) – will dictate NZ Insurers - cautious, facing significant cost increases Earthquake Insurance traditionally underpriced (market driven v exposure) Financial pressures – rating downgrades etc Resources stretched – EQC / Private Insurers

29. Overview • Two events Sep 2010 and Feb 2011 and in some cases three events(Boxing Day) • Overall estimated cost $15bn • Total general insurance premium spend in N.Z $4.2bn • More than just an insurable event – involves loss of life, community and fabric of economic activity in the area. • How do brokers and insurance companies react to an event when the very people who are there to help are equally affected by the event?

30. Investors getting the shakes! • Commercial v’s Residential • Has domestic market changed? • Underwriters asking more questions? • Limit in capacity in Canterbury region • Staying with the same insurer

31. Investors getting the shakes! • With market increasing – look at higher voluntary excesses • More due diligence when purchasing • The quality of the insurer means something • The quality of your intermediary means something

32. Examples of Damage – Chch EQ – Feb 2011

33. Examples of Damage – Chch EQ – Feb 2011

34. Examples of Damage – Chch EQ – Feb 2011

35. Examples of Damage – Chch EQ – Feb 2011

36. Examples of Damage – Chch EQ – Feb 2011

37. Examples of Damage – Chch EQ – Feb 2011

38. Examples of Damage – Chch EQ – Feb 2011

39. Any Questions?