Tower Limited (NZX/ASX: TWR) has completed its reinsurance programme for the financial year ending September 30, 2027, with the company’s reinsurance cost ratio falling for the second consecutive year and its catastrophe cover reaching a new high.
Tower’s reinsurance premium expense is estimated at 9.5% of gross written premium in FY27, down from 10.6% in FY26 and 13.3% in FY25. The catastrophe upper limit rises to $970 million from $915 million. The third catastrophe limit increases to $100 million from $85 million. Catastrophe event excesses remain at $20 million.
For brokers, the numbers raise a practical question: across Tower’s home, motor, boat, and commercial portfolios, where does the saving reach clients?
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Tower chief executive Paul Johnston attributed the lower cost ratio to global reinsurance market conditions, the company’s own business performance, and the expansion of its risk-based pricing capability across additional perils in FY25 and FY26.
“Our disciplined approach to risk selection, pricing, and portfolio management has helped us secure a strong outcome for our FY27 reinsurance arrangements, supporting Tower’s ongoing resilience and ability to offer competitive pricing for customers,” Johnston said.
The global context is well-documented. AM Best revised its outlook for the global reinsurance segment to stable from positive in January 2026, reporting that property catastrophe and retrocession rates at the January 1, 2026, renewals fell between 10% and 20% on loss-free placements. The same AM Best report noted reinsurance capacity entered 2026 at record levels – approximately US$540 billion in traditional dedicated capital and US$120 billion in insurance-linked securities, built on three consecutive years of strong reinsurer earnings.
Marsh New Zealand’s February 2026 market update put the global rate decline at over 12.5%, with capacity for New Zealand risks continuing to grow and competition among insurers for commercial accounts intensifying.
The pass-through from reinsurance savings to policyholders splits along a well-established line between commercial and personal lines.
Gallagher Insurance New Zealand’s May 2026 Corporate Market Update confirmed that pricing across key commercial insurance lines in New Zealand continues to soften, with insurer appetite expanding and capacity growing from both local and international players.
For residential policyholders, the picture is more constrained. The Reserve Bank of New Zealand’s (RBNZ) May 2026 Financial Stability Report found downward pressure on property premiums concentrated in commercial lines. For households, premium inflation had fallen from around 20% in 2024 to around zero – a slowdown in the rate of increase, not a decrease in what policyholders pay.
The Insurance Council of New Zealand’s (ICNZ) premium breakdown page explains part of the structural reason: reinsurance is one component of a home premium, sitting alongside government levies and GST, which together account for a substantial share of a household’s insurance bill. A reduction in the reinsurance component has a limited effect on the total amount a homeowner pays.
Tower’s FY27 programme covers home, motor, boat, and commercial portfolios across New Zealand and the Pacific. Tower’s NZX announcement does not specify how the reinsurance saving is expected to distribute across those lines.
Tower also changed how its third catastrophe limit is arranged. Previously purchased annually as a prepaid cover, the FY27 structure operates on pre-agreed terms, becoming payable only if two catastrophe events occur within the year.
Under the revised structure, the third catastrophe limit is payable if two events occur, rather than being purchased annually as prepaid cover. The change comes as New Zealand’s insurance market remains soft, with Gallagher reporting that market conditions have softened since the third quarter of 2024.
Recent severe weather losses illustrate why catastrophe limit sizing remains important for New Zealand insurers. ICNZ’s Cost of Natural Disasters database puts insured losses from the October 2025 South Island severe weather events at $158.9 million across 16,885 claims.
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Several of Tower’s global reinsurance partners committed to multi-year agreements, providing greater certainty around future reinsurance costs and catastrophe excesses.
Gallagher’s March 2026 update flagged a potential tipping point – where falling premiums and normalising claims volumes converge – that could prompt insurers to become more selective about which risks receive pricing relief. If those dynamics begin to materialise heading into 2027, multi-year reinsurance terms offer a degree of cost certainty that annual renewals would not.
For brokers placing Tower paper on commercial accounts, that structural stability is worth communicating to clients at renewal.
For household clients, reinsurance conditions are one part of a broader cost picture. The current softening helps – but it does not, by itself, resolve the underlying affordability pressures that have shaped New Zealand’s residential insurance market over the past three years.
