Sharing the risk - update

So we've heard that IAG's reason for ceasing to offer domestic insurance in Wellington is because they are over-exposed in the region. Apparently IAG through its many and varied brands (State, AMI, Lumley, various Bank products, Lantern, and NZI) has over 50% of the market in Wellington. I'm not sure if this is just in the domestic market or also in commercial property as well (IAG have a large commercial book as well).

This suggests that IAG is being prudent (over-exposure in Christchurch and low levels of reinsurance sunk AMI). HOWEVER, this demonstrates a market failure. In 2011 when IAG was allowed to purchase the "good book" AMI (the brand, ongoing policies and non-CES claims) many in the industry questioned why this was being allowed, but the Commerce Commission rubber stamped the deal. In 2014 IAG was allowed by the Commerce Commission to purchase Lumley, despite greater levels of concern. The purchased increased IAG's market share in the consumer/home insurance market insurance to over 50%. In comparison, Vero's attempt to buy Tower in 2017, which would have put Vero's market share over 30% was turned down. Between them Vero and IAG have around 70% of the market.  

What seems certain is that the lack of real competition which is currently affecting Wellington, Marlborough, and Christchurch is going to continue and probably spread unless the market is regulated to break up the duopoly.