Tower Limited (NZX/ASX: TWR) has upgraded its full-year profit outlook after large event claims came in well below budget in FY26. The headline shift is significant. The context behind it carries more weight for brokers.
The insurer set a $45 million large event allowance for the financial year ending September 30, 2026, and used approximately $25 million of it. After tax, the $20 million gap added around $14 million to expected underlying net profit after tax (NPAT). Tower now expects FY26 underlying NPAT of between $69 million and $79 million, against earlier guidance of $55 million to $65 million.
The figures, released to the NZX on October 6, 2026, are preliminary and unaudited. Full results are due November 26, 2026.
Tower described FY26 as a return to a “more typical earnings profile” after an “exceptionally strong” FY25. The broader market record complicates that description.
According to the Insurance Council of New Zealand’s (ICNZ) Cost of Natural Disasters database, the full-year 2025 extreme weather total reached $278.2 million across the sector. The South Island severe weather events of October 2025 alone produced $158.9 million in insured losses from nearly 17,000 claims. January and February 2026 added a further combined $159.8 million.
Tower’s $25 million in large event costs sits well below those figures. That gap reflects deliberate risk selection as much as weather luck. The company’s half-year results, filed with the NZX in May 2026, showed that over 90% of new house policies sold in the first half of FY26 were assessed as low or very low risk for flood, sea surge, and landslide.
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Benign cat experience is not the only cost-side factor moving in Tower’s favour. Its reinsurance spend dropped from 13.3% of gross written premium (GWP) in FY25 to 10.7% in FY26, following renewal of its reinsurance programme in September 2025, per an NZX filing.
Despite those structural improvements, Tower’s GWP grew only 3% for FY26, in line with its low single-digit guidance, while customer numbers rose 8% to 345,000. The combination – more customers, slower premium growth – points to pricing restraint rather than rate hardening.
For brokers, that restraint lands in a market already under significant external pressure on affordability.
The Reserve Bank of New Zealand’s (RBNZ) May 2026 Financial Stability Report placed insurance affordability on its risk register for the first time, noting that house insurance premiums have risen at a significantly greater rate than the Consumer Price Index since around 2009. The report estimated total sum insured for residential dwellings in 2024/25 at approximately $1.5 trillion, with the national average annual buildings premium at around $2,900.
The RBNZ identified five channels through which broadening insurance retreat – driven by affordability pressures, underinsurance, and insurer withdrawal from flood-exposed areas – could transmit into the banking sector.
Cabinet directed the Council of Financial Regulators (CFR) to begin a six-month review of household insurance pricing and affordability in January 2026, per a New Zealand Treasury Cabinet Paper published that month.
For brokers, the regulatory backdrop matters: pricing decisions and portfolio selection strategies are now visible to government and the central bank in a way they were not two years ago.
Tower’s benign FY26 cat experience may not repeat. NIWA’s Seasonal Climate Outlook for September-November 2026 confirms that El Niño conditions have strengthened considerably since mid-winter, with peak impacts expected during the 2026-27 summer.
New Zealand’s general insurance market was forecast to grow 10.3% in 2025, driven by premium rate increases in property and motor lines, with property insurance projected to account for 42.3% of total general insurance GWP, according to GlobalData.
Whether Tower sets a higher or lower cat allowance heading into FY27, and whether below-budget experience in FY26 feeds into softer renewal pricing, will be among the questions that the November 26 full-year results will need to address.
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Reported profit will continue to trail underlying NPAT due to costs from Tower’s customer remediation programme. That programme relates to the misapplication of multi-policy discounts affecting around 61,000 customers.
The High Court issued its ruling in December 2025 following Financial Markets Authority (FMA) action: Tower paid a $7 million penalty and committed to repaying around $12 million to affected customers including interest, per its NZX filing. Further costs were still being incurred as of October 6, with no quantum disclosed.
