Tower has announced a successful reinsurance program renewal for the 2024 fiscal year, despite a demanding reinsurance market due to significant global weather events.
The NZ insurer unveiled a comprehensive program at competitive rates covering home, motor, boat, and commercial portfolios in both New Zealand and the Pacific, as detailed in a news release.
Tower has adjusted its catastrophe upper limit to $750 million from $934 million, aligning with the Toka Tū Ake EQC cap increase to $300,000. The coverage includes protection for two catastrophe losses up to $750 million with an automatic reinstatement and an additional cover for a third catastrophe event up to $75 million.
Combined with Tower's existing multi-year placements, these adjustments lead to an increase in reinsurance excesses. For the first two events in FY24, the excess is now $16.9 million, up from $11.9 million in FY23. For a third event in FY24, the excess is $20 million.
The company estimates that it will allocate 13.9% of total income for reinsurance cover in FY24, a decrease from 15.7% in FY23, inclusive of backup cover. Excluding backup cover, reinsurance costs accounted for 12.3% of total income in FY23. This shift reflects Tower's adjustments in risk-based pricing in anticipation of a challenging reinsurance renewal and shifts in the business mix.
Tower CFO Paul Johnston said that the company’s reinsurance strategy will provide protection against large events while still maintaining financial flexibility for growth and strong solvency.
“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,” Johnstone said. “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.”
Recently, the insurer also announced its cyclone response cover pilot program in anticipation of the upcoming cyclone season, providing added financial security and peace of mind to the people of Tonga.
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