Tower says being more selective on risks is vital given the accelerating frequency of New Zealand natural disasters, and the changed environment has highlighted that “sooner or later” corporate insurers will be unable to provide cover to everyone.

Chairman Michael Stiassny says Tower has long been urging New Zealand to stop building in risky areas, and it introduced risk-based pricing to send the right signals to customers and encourage better government decision making.

While no-one can predict the climate future with any certainty, data indicates that catastrophic weather events experienced recently are more likely to be symptomatic of a new normal than a one-off outlier, he told a financial results briefing today.

“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 welcomed national discussions around the potential need for managed retreat in some locations and says conversations need to be held early and in an open and transparent manner.

“In this new normal of frequent catastrophic events, risk-based pricing, together with being more selective on the risks we take on, are vital to ensure Tower can remain a resilient business,” he said.

“Importantly, it enables us to be competitive against the Australian duopoly and underpins continued availability of reinsurance.”

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 the 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.”

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.

Gross written premium (GWP) rose 15% to $NZ245 million ($229 million) on rate changes and customer growth.

The 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.

Mr Turnbull says the company is keeping pace with inflation via targeted rating and underwriting actions, while addressing rising vehicle theft with responses such as increasing premiums and excesses for models stolen more regularly.

Product development and innovation to support climate change resilience is also a priority, with the company planning to expand its parametric insurance pilot in Fiji to also cover cyclone hazards in Tonga and Samoa, he says.