WELLINGTON, Oct 27 (Reuters) - The Reserve Bank of New Zealand said on Wednesday that its first stress test of the insurance sector highlighted that the industry was reliant on offshore reinsurance providers.
The 2021 General Insurance Industry Stress Test (GIIST) covered New Zealand's five largest incorporated general insurers who together accounted for over NZ$5 billion ($3.6 billion) in gross premiums during the 2020 financial year, representing just over 70% of the sector, it said in a statement.
The RBNZ said its reinsurance market stress scenario showed insurers were reliant on reinsurance arrangements, posing challenges for the New Zealand market if these arrangements were disrupted.
The tests also showed that any increase in the intensity of weather events could pose threats to the domestic market.
"Physical and transition risks from climate change will be a focus of our industry stress testing over coming years," Deputy Governor Geoff Bascand said in the statement. ($1 = 1.3998 New Zealand dollars) (Reporting by Praveen Menon; editing by Richard Pullin)
