Tower hikes house and contents premiums

Tower's house and contents insurance premiums are going up by between 25 per cent and 30 per cent. Photo /

Tower has raised its premiums for house and contents insurance by between 25 per cent and 30 per cent to reflect an increase in charges from reinsurers after locking in $525 million of cover for the 2012/2013 year.

The insurer raised its cover from $500 million per event, taking advantage of spare capacity in the reinsurance market to lock in more cover at a reasonable rate, said managing director Rob Flannagan.

"There are lots of events out there but there's also a bit of capacity in the market at a reasonable price," he said. "We want to keep increasing our overall cover so we're not vulnerable."

That's even though $500 million of cover is "way above what our modelling says we would require".

Tower's excess has risen to $11.7 million from $6.7 million a year earlier, the company said in a statement. The$525 million programme again involves reinsurance cover for two catastrophe events, it said.

"Due to changes in the programme, and an increase in premium levels charged by reinsurers, Tower's total reinsurance premiums for the 2012/13 year will be higher than in 2011/12," it said.

Tower, which is about one third-owned by Guinness Peat Group, last month lowered its annual profit guidance because of the impact of Christchurch earthquake claims and as it concluded a strategic review.

The Auckland-based company said market expectations of profit for the year ending September 30 should be reduced by $9.4 million "to take into account increases in claims provisioning relating to the February 2011 event".

Tower made a profit of $33.4 million a year earlier and the downgrade amounts to a one-time impact of 3.5 cents a share, it said.

The shares last traded at $1.81 and have gained 18 per cent this year.