Mother Nature may always win but we can prepare for and respond to extreme weather more innovatively and realistically, Tower's Blair Turnbull says

By Gareth Vaughan

Following the spate of extreme, damaging and costly weather events in the North Island this year we shouldn't let a big disaster go to waste, Tower Insurance CEO Blair Turnbull argues.

Speaking in the latest episode of the Of Interest podcast, Turnbull says the realisation from frequent and extreme weather such as the Auckland anniversary floods and Cyclone Gabrielle is that we are seeing climate change, and we need to understand it better and adapt.

"We're starting to rethink how to respond to some of these flood events. One thing's very clear, Mother Nature always wins. So we can't just sit there and try and pipe away this excess water, we have to think differently," Turnbull says.

Auckland Council's Making Space for Water programme to help manage floods is "quite innovative," he adds.

Turnbull says the spate of extreme weather events is changing the way reinsurers, who provide insurance for insurers, look at New Zealand, which will lead to further price rises.

"This has been a bit of a surprise to some of them [reinsurers]," Turnbull says.

Parametric insurance and risk based pricing are two ways Tower's responding to potentially higher reinsurance costs.

Parametric insurance is a type of insurance contract that insures a policyholder against the occurrence of a specific event by paying a set amount based on the magnitude of the event, as opposed to the magnitude of the losses in a traditional indemnity policy.

Turnbull says a parametric insurance pilot in Fiji has gone well, with Tower set to also start offering it in Samoa and Tonga and likely NZ too.

"We do think it [parametric insurance] has application for here in New Zealand in areas that could have higher propensity for flooding and cyclones and where traditional comprehensive insurance may become too expensive for some households and communities. We would like to explore the option for offering parametric cover," says Turnbull.

"We're talking to a couple of iwi groups, which is quite exciting and they're giving us feedback."

Tower's risk-based pricing, linked to the risks of individual homes, already includes earthquakes and floods, and is being extended to cover coastal inundation and slips. Turnbull says risk-based insurance for drivers, using telematics, could also follow.

Meanwhile, Turnbull suggests NZ is moving closer to having areas regarded as uninsurable by private sector insurers after the recent run of extreme weather events.

"I think we are [closer than a year ago] ... I think it's really important that as a country, as insurers, as communities, that we do acknowledge them [the weather events], [and] don't let that big disaster go to waste. It's time to adapt and get out of the way of where there are flood prone areas," Turnbull says.

In the podcast he talks about other issues, including Tower's recent interim financial results, how the insurer has responded to high inflation, the future for insurance, and the response to Cyclone Gabrielle and North Island flooding.

You can find all episodes of the Of Interest podcast here.