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Tower insurance forecasts $3m first half loss due to surge in weather event claims

Radio New Zealand logo Radio New Zealand 8/05/2023

A surge in claims from floods and cyclones will result in a first half loss for insurance company Tower.

The company has forecast a loss of around $3 million for the six months ended March compared to a last year's $3m profit, as it tallied the cost of three major weather events at between $260m and $310m.

"Over a three-month period New Zealand has experienced record flooding in Auckland and its worst cyclone this century. There has also been two significant cyclones in Vanuatu," chief executive Blair Turnbull said.

On top of the first half loss Tower said there would be no interim dividend, and it cut its full year underlying profit forecast to between $8m and $13m from the previous $18m to $23m.

The group had received more than 9100 claims for the floods and cyclones, more than half of which were for the North Island floods with estimated costs of between $195m to $225m.

"Tower estimates that the average claims cost for this event will be around double that of other recent large weather events. This is due to deeper flood waters in high density areas causing substantially more damage, contamination, and landslides," Turnbull said.

It had received 3350 claims related to damage from Cyclone Gabrielle, with an estimated cost between $55m and $75m, while the Vanuatu cyclones had 250 claims with estimated cost at about $10m.

Tower's direct liability for the floods and Cyclone Gabrielle was $11.9m for each event, with its catastrophe reinsurance covering the rest.

It has up to $889m of such cover, and would be reinstating the cover for a possible fourth major event this year.

It said large events had cost it $34m in the current year and it increased its amount for them to $50m from $40m.

Tower also signalled a 5 percent rise in premiums because of inflation, reinsurance increases, and higher vehicle and general claims.


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