Tower is taking action on risk assessments for flooding and landslides after New Zealand North Island storms and damage caused by Cyclone Gabrielle. 

CEO Blair Turnbull says Tower is expanding its risk-based pricing model to include landslide and coastal hazards, and plans to introduce automated pricing for both in the second half of this year. 

“Immediately following the events this first half we implemented heightened risk selection criteria for landslide risks,” he told a financial results briefing. “We have also increased the weighting we put on the flood risk portion of customer premiums to ensure our pricing accurately reflects the changing risk profile.” 

Chairman Michael Stiassny says Tower has long urged New Zealand to stop building in risky areas, and has welcomed national discussions around the potential need for managed retreat in some locations, with data indicating recent catastrophes are more likely to be symptomatic of a new normal than an outlier. 

“I’ve never been one to mince words and it is inevitable that sooner or later Tower and other corporates will be unable to provide insurance to everyone,” he said. “It’s a grim reality.” 

Mr Stiassny says risk-based pricing, together with being more selective about risks taken on, is vital to ensure Tower can remain resilient. 

Tower reported an underlying loss of $NZ3.3 million ($3.1 million) including large events costs for the six months to March 31, after flagging the result earlier this month. 

The reported result swung to a $NZ5.1 million ($4.8 million) loss compared to a $NZ3 million ($2.8 million) profit a year earlier. 

The loss includes an adverse $NZ1 million ($931,375) charge related to expected cost increases for Canterbury earthquake claims. The company closed a further 15 over the half, while receiving 10 new overcap and reopened claims, bringing the total down to 31 from 36 at the end of September. 

“The increase in expected cost was driven by both inflation and more costly rectification,” CFO Paul Johnston said.  

Tower’s second-half outlook includes GWP growth of 15-20%, while a full-year underlying net profit of $NZ8-13 million ($7.5-12.2 million) is expected, assuming the $NZ50 million ($46.7 million) large events allowance is used.