General insurer Tower says New Zealand still doesn’t have clarity or consensus on which parties should pay for climate adaptation and has warned the stakes are high given NZ has the second highest natural risk profile in the world.
Natural hazards and climate adaptation were the hot topic at Tower Insurance’s annual general meeting on Tuesday.
Tower Chairman Michael Stiassny told shareholders the insurance sector needed “long-term certainty” on climate change adaptation policy to keep insurance available and affordable and so the reinsurance environment could remain stable.
He said there was no question that the company’s strong September 2024 year financial results were “significantly aided” by the lack of large events during the period.
“The weather was kind,” he said in his speech.
Tower’s annual underlying net profit after tax (NPAT) rose to $83.5 million, a complete reversal from underlying profit levels in 2023.
It also reported gross written premium (GWP) jumped to $595 million in the September year, up 15% from the $527 million in GWP that the insurer reported in the 2023-year. GWP is the total amount of premiums collected.
Tower’s board declared a final dividend of 6.5 cents per share, bringing the total dividend for its 2024 financial year to 9.5 cents per share.
On Tuesday, Tower shareholders also approved a return of $45 million of capital to shareholders via a mandatory share buyback.
LA lessons
Stiassny told shareholders Tower remained “well-positioned” to deliver value to them.
He talked at length about the California wild fires that killed at least 29 people and destroyed thousands of homes in January, and warned there were lessons for NZ in the wake of the fires.
“These fires have wreaked havoc and had a huge human cost, in terms of both loss of life and
property. Sadly, they have also laid bare a massive insurance gap that has been decades in the making,” Stiassny said.
New Zealand needed to avoid this situation “at all costs”.
“While we currently have extraordinarily high rates of residential insurance, mounting climate impacts do put pressure on premiums as reinsurance becomes more expensive. To the best of its ability, Tower will continue to support communities as risks evolve by pricing accordingly. But we have always been clear that we cannot help everyone,” he said.
Stiassny said Tower was urging the Government to complete a climate adaptation framework that has cross-party support, as quickly as possible.
“That framework is crucial for minimising the insurance gap and preventing New Zealanders experiencing the anguish that many thousands of Californians are experiencing today,” he said.
While a cross-party committee was tasked by Climate Change Minister Simon Watts last year to work out how NZ mitigates the risks and costs of severe weather events as well as developing objectives and principles for a climate adaptation framework, the committee’s final report had more questions than answers.
The report found the country’s current system of managing natural hazards and climate risks was “under stress” but didn’t have any straightforward solutions on how to fix it.
A big part of this is because managing the risks, costs, and responsibilities of natural hazards are shared across private asset owners, councils, insurers, and central government. It still remains unclear about what role central government has in funding pre-disaster and post-disaster events.
Stiassny described the question of which parties pay for climate adaptation as the “elephant in the room” and said it “looms large and unresolved”.
“And, until there is clarity and consensus on this vital point, Tower remains concerned,” Stiassny said.
“There is significant, complex work still to be done and we’re out of runway. The 2023 Auckland floods and Cyclone Gabrielle are estimated to have cost the economy $15 billion. We might not know when, but we do know that a similar event – or worse – will occur,” he told shareholders.
Lower premium growth
Tuesday marked the second to last day on the job for CEO Blair Turnbull who is leaving Tower on Wednesday after spending four and a half years in the role.
Turnbull has been appointed as the new CEO of fund manager Milford Asset Management and is starting there in March.
Tower’s Chief Financial Officer Paul Johnston will become Tower’s interim CEO from the 13th February.
Turnbull gave an update on the first three months of Tower’s 2025 financial year, saying Tower’s customer numbers had grown by around 5,000 which means the general insurer now has around 310,000 customers.
“Gross written premium rose by 6% – excluding divested portfolios – to $155 million compared to the same period last year, reflecting growth in lower risk assets,” he said.
“While rating increases have now flattened on average, following the higher rate increases implemented in early 2024, we are pleased to see strong volume growth increasing over the first three months of [financial year] 2025.”
The listed insurer told the market last week that it had revised its full year underlying NPAT to a range of between $60 million and $70 million. This is up from the previously advised range of between $50 million and $60 million. The revised profit range still assumes “full utilisation” of Tower’s $50 million large events allowance.
Johnston said $3 million has been used to date because of the Dunedin flooding event in October 2024.
Tower now also expects GWP growth — excluding revenue from sales of subsidiary operations — of between 7% and 12% in 2025. Tower had previously expected a GWP increase of 10% to 15%.
The company attributed a reduction in average premiums due to higher-than-expected proportions of lower risk new house insurance and motor policies as the reason behind the lower-than-expected GWP prediction.
18 Comments
Insurance company wants to press for further govt assurance to be able to socialise losses from wide scale events or they threaten to become bearish on insuring people in certain locations etc. They've seen what happened after hurricane Gabrielle with local govt buyouts and wish to lower their exposure on the precedent that govt may do it again. makes too much business sense on their part not to press
I do think we need some kind of commitment from the government about what will happen to the uninsurables. Will the government insure them, or will private insurers have to subsidise them, or are they on their own? If its the latter (which is my preference), then they need to be told now, not after its too late and they have their hand out.
EQC or whatever it is now called does help with this in some situations. But IMO it depends if they knew the risks before they purchased the property. Anyone who purchased a house near the sea in the last 30years should have known about rising sea levels etc. But there are things that were unknown, such as climate change potentially resulting in more fires.
I agree. However the government keep setting a bit of a precedent that people will be bailed out every time something bad happens. I doubt we can afford that for climate.
Then there is also the council involved too. If the council permitted activity on land that was not suitable, they could also be liable. That needs to be nipped in the bud too.
We need the government to have the balls to say (and legislate) "you will be on your own" before its too late...
It is time for another state run insurance scheme. There have been too many problems with the current setup and a lack of competition in the market, especially as companies have been allowed to merge. When Kiwibank came along it caused the big banks to up their game. Likewise when Ansett came in, Air NZ was forced to up their came, including upgrading their old terminal (hanger) in Wellington. We are going to get tot he stage where many will not be able to afford insurance, and insurers being able to pick an choose which ones they want insure by essentially hiking premiums for those in higher risk areas. But I thought insurance was all about spreading the risk across a large pool of people, so the risk evens out. EQC or whatever they now call it does help but got cleared out after the Chch disaster.
Interesting starting to see some stereotypical faux-right folk on LinkedIn pivoting recently. Seems fairly uniform.
From "climate change is a hoax and not happening" to "climate change is happening but it's not caused by humans but taxpayer money will be needed for adaptation".
Maybe their properties are in the wrong place.
All part of the 5 stages of denial, the climate change denier playbook has been know for a long time. This article is 11 years old.
https://www.theguardian.com/environment/climate-consensus-97-per-cent/2…
I see the Tower CEO has moved/ is moving onto Milford Asset as CEO. I don't know the his full background but hope his background as an insurance CEO will be be beneficial for Milfords funds. I wonder what Milford Asset funds and KS performance is going to be like under him. I put a question to Milford Asset about their shareholders and when the new CEO starts. I'll be interested in their answer.
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.