Tower premiums to rocket
Tower is raising its home and contents insurance premiums by about 30 per cent on average across the country but it will be up by more than 50 per cent in parts of Christchurch.
The New Zealand general insurer said yesterday it has secured reinsurance for the 2012-13 year of $525 million of cover for each of two events at a cost of $29.4m, about 25 per cent higher than the year before.
The excess the company had to cover in the 2012-13 year would be $11.7m, up from $6.7m the previous year.
Its cover for the Canterbury earthquakes had been $325m an event which rose to $500m later last year and is rising to $525m for the coming year.
Tower group managing director Rob Flannagan said $525m should be "more than adequate" from the modelling it had done.
Tower had about 10 per cent of the general insurance market in New Zealand. It does not insure businesses.
Flannagan said that, before the Canterbury earthquakes, its reinsurance cover cost $9m.
Because of the rise in reinsurance, the company was increasing premiums for its house, contents and motor policies.
Across the country, the house and contents premium increase would be about 30 per cent following a 50 per cent premium increase last year, including the tripling of the Earthquake Commission levy from February.
Premiums in riskier places such as Christchurch would be higher than in Invercargill and were probably on a par with some properties on the fault lines in Wellington and through the North Island and Bay of Plenty. Christchurch was still an unstable seismic area, according to geotechnical advice.
In some Christchurch areas, premium rises could be higher than 50 per cent depending on geotechnical information, he said.
"The scientific community is being very cautious in their judgment calls and you could say rightly so but, at the same time, it does make us all very cautious about about providing insurance."
After the quakes last year, the market shut down and insurers renewed the insurance of existing residential customers only.
In the past month Vero, Lumley and IAG have begun offering cover on new homes in Canterbury on a case-by-case basis.
Flannagan said Tower was reviewing its position to see if it would expand its cover beyond existing customers.
Flannagan said reinsurers had been placing a lot of pressure on New Zealand insurance firms to limit their exposure by no longer offering open-ended replacement cover. They wanted insurers here to have some kind of cap in place by May next year. That could be through setting a maximum-dollar-per-square-metre coverage or setting a fixed sum insured.
Flannagan said Tower had not made a decision yet on a dollar limit per square but $2000 seemed to be the "fashionable" amount.
It was rolling out new premiums next year. Tower customers may have the option of taking a higher excess for a reduction in their premiums.