AM Best has affirmed Tower Insurance’s financial strength rating at A- and issuer credit rating at a- with a negative outlook.

The outlook reflects concern about the impact of “further loss development from the Canterbury earthquake claims” on the New Zealand insurer.

“Factors that may lead to negative rating actions include continued adverse loss development or a reduction in capital that could cause the company’s risk-adjusted capitalisation to decline,” the ratings agency says.

Tower’s financial statement on the half-year to March 31 said estimated gross ultimate incurred claims for the February 2011 earthquake have exceeded the catastrophe reinsurance and adverse development cover limits.