TWR - Tower Insurance.

[lissica]

Was somewhat busy yesterday and through the night ... Only just caught up about 15 minutes ago. Sorry for the dumb question and thanks for the response lissica.

No such thing as a dumb question, and you were spot on anyway >.<

[Snoopy]

I'm guessing that TWR's R/I arrangements will limit their exposure to just 5 mill again. Any dissenters?

Surely real issue is EQC levies up 200%, overseas reinsurance premiums up sharply. If houses are still insurable against earthquakes in NZ, and I stress that 'if', I would say that it will be impossible to insure quite a modest suburban house for less than $1000pa. Perhaps people wil cope by just dropping their contents insurance to pay for it? This can't be good news for retail insurance companies can it?

SNOOPY

[CJ]

Perhaps people wil cope by just dropping their contents insurance to pay for it?

I see it as a positive. People will ensure that they are fully insured as events like chch and floods in Queensland (of all places following years of drought) only go to show that you need to be fully insured in case mother nature decides to strick. Many Aucklanders/Wellingtonians will be reviewing and upping their policies.

[winner69]

I see it as a positive. People will ensure that they are fully insured as events like chch and floods in Queensland (of all places following years of drought) only go to show that you need to be fully insured in case mother nature decides to strick. Many Aucklanders/Wellingtonians will be reviewing and upping their policies.

Just think of the economic impact of that on the country

There's just over 1.6 million households in NZ .... lets say 1 million of them increase their insurance cover and/or get charged more by their insurors ... lets say $500 each ... thats $500m more in premiums for the household to cover

CJ would say good news for the likes of TWR ....heaps more preniums to invest to make heaps more money when the risk probably hasn't increased much from a week ago

On the other hand thats less for the households to spend on other stuff ....$0.5 billion
is more than 1% of total annual retail spend so implications here.

Whats happening in the world of insurance in interesting. It is a multi trillion dollar industry .... appaently 2nd only to tourism worldwide .... much bigger than the oil business etc. What they have beeen seeing lately is a trend to natural disasters hitting large population areas .... cities etc where natural disasters have not really tended to occur. Many say climate change is the reason behind this trend (possibly climate change can trigger earthquakes?) ....a nd as the pundits say insurance companies have large amounts invested in industries thatare the cause of this climate change .... and invest very little in businesses (more environmentally friendly ones) that could eventually mitigate their losses ... the same pundits say they deserve all they get .... but forget that end of the day it is you and me that pays

[CJ]

CJ would say good news for the likes of TWR ....heaps more preniums to invest to make heaps more money when the risk probably hasn't increased much from a week ago

On the other hand thats less for the households to spend on other stuff ....$0.5 billion
is more than 1% of total annual retail spend so implications here.

This is the TWR thread, hence my comments.

[Snoopy]

People will ensure that they are fully insured as events like chch and floods in Queensland (of all places following years of drought) only go to show that you need to be fully insured in case mother nature decides to strick.

If they can afford it, O.K. A 20% increase the people might stomach it. A 100% increase and something else will have to give. I go for discretionary insurance costs to be cut. The thing is contents have become so cheap to buy at the Warehouse, it is hardly worthwhile having such insurance any more. Most depreciated item loss is well below the minimum policy excess offered.

SNOOPY

[POSSUM THE CAT]

CJ & Snoopy The cost of full flood Insurance in Queensland would make the EQClevy even if it trebled look very cheap and they do not cover earthquakes at all unless their policy wording has change dramatically since I left approx 4.5years ago.

[Snoopy]

Also, the unique nature of the EQC levy - effectively a not-for profit r/i contract in its own right - will keep r/i premiums down and retail premiums down due to kicking in before retail insurers have to pay out.

EQC levy is hidden inside the retail premium that all local retail insurers pay, last time I checked. Competition will only keep price rises down to 100% or so, IMO.

SNOOPY

[Jaa]

EQC levy is hidden inside the retail premium that all local retail insurers pay, last time I checked. Competition will only keep price rises down to 100% or so, IMO.

SNOOPY

Snoopy your fears are unwarranted.

Insurance companies and their re-insurers spend a lot of time and effort working out their risk. A 100% price increase post a disaster would mean they were completely incompetent which believe me they are not.

As the TWR CEO said after the last quake, insurance, risk management and paying out claims is their core business and they are well prepared for it.

Tower is run very conservatively, more so than Suncorp (Vero, #1 in NZ) and IAG (State, NZI, #2) which makes sense as they are also smaller and more geographically concentrated. Thus TWR only have $5m at risk ($3.5m after tax) from any single event and the latest quake has the same financial impact for them as the recent Samoan Tsunami. No doubt they pay higher re-insurance premiums for such a small excess.

These re-insurance premiums are only a small part of what a policy holder ends up paying to remember. Looking at TWR's 2010 numbers for General Insurance and Health they had $340m of premium income and paid $21.6m in reinsurance. Thus a realistic 10-20% increase in reinsurance costs isn't going to make a lot of difference to the policy holder, maybe a 5% increase?

The global re-insurers know NZ sits on many active fault lines and would have factored it in. Its also been a long time since they have had to seriously pay out in NZ.

[POSSUM THE CAT]

Jaa read the morning papers ReInsurers are thinking of withdrawing from reinsuring Australian & New Zealand due to the amount of claims