25 May 2023

Damaging weather events leads to loss for Tower insurance

1:47 pm on 25 May 2023
Tower Insurance bulding at 45 Queen Street, Auckland

More than 9000 claims were made to Tower Insurance after a series of damaging major weather events in the North Island Photo: RNZ / Dan Cook

A surge in claims for major weather events in New Zealand and Vanuatu has resulted in a first half loss for insurance company Tower.

Key numbers for the 6 months ended March, compared with a year ago:

  • Net loss $5.1m vs profit $3m
  • Underlying profit (excluding large events) $23.6m vs $18.2m
  • Large event costs $33.9m vs $17.9m
  • No interim dividend
  • Full year net profit forecast $8m and $13m.

Tower's loss was larger than the one signalled in March when it warned of the cost of more than 9000 claims for the upper North Island floods, Cyclone Gabrielle, and two cyclones in Vanuatu would hit its bottom line.

It said it had processed nearly a third of the New Zealand event claims and about 10 percent of the Vanuatu claims.

The cost of the storms and cyclones resulted in a near doubling of the "large event" costs to $33.9m, but the cost to Tower for each of the New Zealand weather events was limited to an $11.9m excess, while the estimated cost of the Vanuatu cyclones was $10m net of reinsurance recoveries.

The company also said the storm in Auckland on 9 May would cost between $4m and $6m, but it had between $10m and $12m to cover large events in the second half, and just finalised reinsurance cover for another two catastrophe events of up to $889m.

Chief executive Blair Turnbull the weather events showed the need and value of a strong insurance sector.

"Tower remains focused on careful risk selection and risk-based pricing, which is a fairer way to price insurance as customers only pay for the risks that apply to their property."

Tower was expanding its risk-based pricing to include landslides and coastal hazards.

The broader business grew on the back of its expanding digital platform, increasing customer numbers to 237,000, while gross written premium income increased 15 percent on the preceding six months to $245m as it raised prices.

"We are proactively managing climate related weather impacts through risk-based pricing and product innovations, keeping pace with inflation via targeted rating and underwriting actions and addressing increasing vehicle theft with rating and excess changes," Turnbull said.

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