Tower Insurance has renewed its reinsurance programme for its 2026 financial year (FY26), increasing its catastrophe upper limit - the maximum amount an insurer will pay out for natural disaster events - by $115 million.
The general insurer made the announcement on the NZX on Wednesday.
Alongside an increased upper catastrophe limit of $915 million - up from $800 million in FY25, Tower will continue to cover for a third catastrophe event of up to $85 million.
In a statement on the NZX, Tower says there will also be “a structural change in protection for large individual property risks, from proportional to excess of loss cover” which will “result in lower reinsurance premiums while maintaining protection for large claims”.
The general insurer says proportional reinsurance means the insurer and reinsurer share premiums and claims in agreed proportions.
“Excess of loss reinsurance means Tower retains responsibility for claims up to a certain threshold, with the reinsurer covering losses above that amount.”
For Tower’s FY26 catastrophe reinsurance excess (this protects insurers financially if there's a large natural disaster) there will be $20 million for the first two events. This is up from $18.75 million in FY25 which the insurer credits to the expiry of multi-year arrangements.
It also includes $20 million for a third event, which is the same as FY25.
This comes as Tower recently updated its guidance for the year ending September 30, with expectations of an annual net profit after tax of up to $110 million - but only if there are no major events this month.
Tower estimates its reinsurance premium expense will represent 10.7% of Gross Written Premium (GWP) in FY26. This is down from 13.3% in FY25.
GWP is the total amount customers pay for insurance coverage on policies issued by the insurer.
“The reduction in reinsurance premium expense will be partly offset by lower reinsurance recoveries on property risks that were previously ceded to a proportional treaty.”
Tower chief executive Paul Johnston says its “risk-based pricing strategy and ability to dynamically adjust rates has once again enabled us to secure favourable terms for FY26”.
“We’ve deepened partnerships with global reinsurers, with several committing to new multi-year agreements. These arrangements offer greater certainty around future reinsurance costs and catastrophe excesses, supporting our resilience.”
Johnston says securing this reinsurance programme “supports our ability to maintain competitive pricing for customers while protecting the business from volatility”.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.