New Zealand insurer Tower has forecast a first-half loss and has cut full-year guidance following the high cost of claims from Auckland flooding and Cyclone Gabrielle. 
 
The insurer says the average claims cost for the Auckland and Upper North Island disaster will be around double that of other recent large weather events due to deeper waters in high density areas causing substantially more damage, contamination and landslides. 
 
As a result, Tower has increased its estimate for the event’s ultimate cost to $NZ195-225 million ($181-210 million), up from $NZ95-125 million ($88-116 million) previously. Claim numbers remain consistent with earlier estimates at around 5550. 
 
Tower has received about 3350 claims from Cyclone Gabrielle and estimates that event’s financial impact at $NZ55-75 million ($51-70 million). 
 
“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,” CEO Blair Turnbull said today.  
 
“Tower is working efficiently to support customers while managing a substantial volume of claims. Tower remains resilient, is focused on careful risk selection and risk-based pricing and is well placed to deliver sustainable growth and earnings.” 
 
Claims above $NZ11.9 million ($11.1 million) will be covered by Tower’s catastrophe reinsurance, which has multiple levels and provides up to $NZ889 million ($828 million) of cover. 
 
The company says it’s seeking to reinstate catastrophe reinsurance to cover the increased cost of the Auckland event. It has full protection for a third event and will reinstate full levels of protection for a fourth this financial year. 
 
Full-year underlying net profit guidance has been cut to $NZ8-13 million ($7-12 million) from $NZ18-23 million ($17-21 million), including the expected cost of reinsurance reinstatements as well as an increase in the large events allowance. 
 
Large events costs now total $NZ34 million ($32 million), causing tower to increase the allowance to NZ40-50 million ($37-46 million). 
 
Tower expects a first-half after-tax loss of around $NZ3 million ($2.8 million) when it reports on May 25, and anticipates not paying an interim dividend. A decision on a full-year payment will be made when annual results are finalised. 
 
The insurer says a strong rating response to address inflation, reinsurance costs and higher motor and other claims frequency has caused it to raise the full-year guidance for gross written premium growth to 15-20% from 10-15% previously.