Chief financial officer Paul Johnston said the strategy provided protection from volatility caused by large event. Photo: RNZ / Dan Cook
Insurance company Tower says its latest reinsurance strategy will provide more certainty for consumers, as extreme weather events become more common.
The company said it has secured a reinsurance programme with competitive rates for home, motor, boat and commercial portfolio cover, across New Zealand and the Pacific.
Chief financial officer Paul Johnston said the strategy provided protection from volatility caused by large events and maintained financial flexibility to support growth.
Tower has purchased cover for two catastrophe losses up to $750 million, inclusive of an automatic reinstatement, as well as cover for a third catastrophe event up to $75m.
Combined with Tower's existing multi-year placements, reinsurance excess would increase to $16.9m for the first two events in the 2024 financial year, Johnston said. That compared with $11.9m in FY23.
"The market has experienced significant increases in reinsurance prices and excesses, so we are pleased to have achieved a comprehensive reinsurance programme with moderate increases in pricing and excesses for FY24," Johnston said.
An excess of $20m would apply for a third event in FY24.
"Tower has received ongoing support from some of the world's largest reinsurers as well as backing from reinsurers looking to start new relationships with us.
"Reinsurers are impressed by our ability to proactively manage risks throughout our portfolio via risk-based pricing, our dynamic rating capability, and digital direct customer relationships."
Tower had decreased its catastrophe upper limit to $750m from $934m as a result of last year's Toka Tū Ake EQC cap increase from $150,000 to $300,000, which reduced the amount of coverage needed.
The company estimated it would pay 13.9 percent of total income for reinsurance cover in the 2024 financial year, compared to 15.7 percent of total income the year prior, including back up cover.
Excluding back up cover, reinsurance costs were 12.3 percent of total income in FY23, Johnston said.