Tower expects to increase its Canterbury claims provisions after a Deloitte review found its costs have blown out due to unexpected increases in new Earthquake Commission (EQC) claims and growing litigation and disputes.

The increase is expected to have a $NZ16.2 million ($15.68 million) impact on the New Zealand insurer’s profit after tax.

Tower says it will consider Deloitte’s final report once delivered, and will confirm the impact.

In the past six months the insurance industry has received more than 800 new claims from the EQC, the company says. It says the average cost of the claims has been more than expected, and the commission’s projected slowdown in new claims has not occurred.

Recent reports suggest there may be more than 6000 EQC claims requiring remediation, some of which are expected to exceed the commission’s $100,000 payment threshold, above which insurers pay.

“The Canterbury earthquakes continue to present a globally unprecedented challenge for the insurance industry and, along with other New Zealand general insurers, Tower continues to manage this issue closely,” the company says.

“The EQC process continues to create significant uncertainty for the insurance industry.

“The general environment in Canterbury, six years after the event, has resulted in a greater number of disputes and extended time required to reach agreement with customers.”

The company partly blames “opportunistic advocates who created unfounded fears in regard to application of the statute of limitations”.

It says this has resulted in more disputes and litigation than expected.

Meanwhile, Tower says it is confident of winning its commercial dispute with adverse development cover provider Peak Re, which began in April last year.