Kiwi insurer, Tower has completed the renewal of its reinsurance programme for the 2024 financial year, decreasing its catastrophe upper limit to $750 million.
Tower says that is has secured a comprehensive reinsurance programme at competitive rates for home, motor, boat, and commercial portfolio cover, across New Zealand and the Pacific, in light of a challenging reinsurance market following significant global weather events.
Last year’s Toka Tū Ake EQC cap doubled to $300,000 which reduced the amount of coverage needed, and the insurer has decreased its catastrophe upper limit to $750 million from the prior $934 million.
Citing a prudent risk appetite, Tower has purchased cover for two catastrophe losses up to $750 million, inclusive of an automatic reinstatement. The company also purchased cover for a third catastrophe event up to $75 million.
Together with its existing multi-year placements, the new cover results in a reinsurance increased to $16.9 million for the first two events in FY24, up from $11.9 million in FY23. An excess of $20 million applies for a third event in FY24.
Tower says that it will pay 13.9% of total income for its reinsurance cover in FY24, which is down on the 15.7% a year earlier, including back up cover. Excluding back up cover, reinsurance costs were 12.3% of total income in FY23.
The lower cost as a percentage of net income reflects adjustments the company has made to its risk-based pricing in anticipation of a challenging reinsurance renewal, and also movements in the business mix.
Paul Johnston, Tower CFO, said, “Tower’s reinsurance strategy provides protection from volatility caused by large events and maintains financial flexibility to support growth while underpinning 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. 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.”
“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 in FY24,” added Johnston.
