Tower has renewed its reinsurance for the year to 30 September 2027, with a higher catastrophe limit and a lower expected cost, the insurer told the NZX on 21 September.
Reinsurance is the cover insurers buy from large overseas companies, so a big storm or earthquake doesn't land on them alone. Tower's programme covers its home, motor, boat and commercial portfolios across New Zealand and Pacific markets.
The catastrophe upper limit rises to $970 million from $915 million. The third catastrophe limit goes to $100 million from $85 million. By our sums, that's $55 million more cover at the top.
The $970 million "includes a pre-paid reinstatement, providing cover for two large catastrophe events," Tower said. The catastrophe event excess, the first slice Tower pays itself, stays at $20 million.
Tower expects to spend 9.5% of gross written premium on reinsurance in FY27, against 10.6% this year. Gross written premium is the total premium an insurer writes in a year.
Chief executive Paul Johnston put the drop down to "a combination of favourable global reinsurance market conditions, Tower's strong business performance, and the FY25 and FY26 expansion of its risk-based pricing capability across additional perils."
Tower also changed how it buys its third layer of catastrophe cover. It used to pay for it up front each year. For FY27 it has "secured this cover on pre-agreed terms, payable if two catastrophe events occur."
Several reinsurance partners are also "committing to new multi-year agreements", which Tower says gives "greater certainty around future reinsurance costs and catastrophe excesses."
The announcement doesn't mention what customers will pay. Johnston said the outcome supports Tower's "ability to offer competitive pricing for customers".
Suncorp New Zealand, which owns Vero, reported on 12 August that its gross written premium fell 4.8% to $2,756 million, "reflecting softer market conditions and customer pricing responding to modest inflation and lower reinsurance costs".
Tower's May result spoke of "pricing pressure". It said premium growth was held back by "lower average premiums, driven by growth in low risk properties which attract lower pricing, and increased competition".
The 9.5% is Tower's own estimate, and it gave this year's cost only as a percentage. It reports its full-year results on 26 November.
