Sharechat Logo

Tower settles with reinsurer Peak Re over policy dispute

Wednesday 28th February 2018

Text too small?

Tower has reached a settlement with reinsurer Peak Re over a dispute relating to its 2015 adverse conditions cover, and will get about half what it's claimed. 

Auckland-based Tower will receive $22 million of the $43.8 million claimed under the reinsurance contract and all sums claimed in arbitration proceedings, it said in a statement. Writing off the residual amount will reduce annual profit by about $15.2 million, it said. The shares rose 2.2 percent to 68.5 cents. 

"During our recent capital raise, the board indicated that real risk existed in both the process and the binary nature of the arbitration," chair Michael Stiassny said. "The board determined that a commercial settlement satisfactorily dealt with this unpredictability for both parties, and created welcome certainty for our shareholders and our business."

Tower has been repeatedly surprised by the mounting cost of the 2010 and 2011 Canterbury earthquakes, taking on the adverse development cover to protect its balance sheet if costs escalated further. 

The general insurer was in the middle of a bidding war last year, with Canada's Fairfax Financial Holdings and Australia's Suncorp Group vying for the NZX-listed firm. It ultimately sided with Suncorp's superior offer, but the takeover was rejected by the Commerce Commission over concerns it would reduce competition. 

Tower raised $70.8 million last December at a deep discount to get enough headroom to deal with anymore cost escalation from Canterbury, using the funds to repay bank debt and boost its regulatory solvency capital. 

The company today said the Peak Re settlement will give it solvency capital of $136 million, some $28 million above the Reserve Bank's minimum requirements. 

(BusinessDesk)

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

Hydrogen not a short-term option for Huntly - Genesis
Kiwibank says customers have a dwindling need of physical branches
Buying off the plans driving down KiwiBuild cost to govt: HYEFU
Fiscal policy to slow growth over next five years, despite surpluses
Treasury forecasting annual wage growth above 3% over next five years
Robertson unveils first ‘wellbeing outlook’ ahead of 2019 Budget
NZSA throws its weight behind Vital’s rebel investors
Food prices ease in November: buy your strawberries now!
Transport strikes averted as TIL Logistics, Air NZ find common ground with unions
Restaurant Brands 3rd-qtr sales rise 4.7% as Australia, Hawaii grow

IRG See IRG research reports