Peak Re reaches $22m settlement with Tower
New Zealand-based general insurer Tower has entered into a $22 million settlement agreement with Hong Kong's Peak Re regarding an adverse development cover policy entered in 2015.
Under the agreement, Tower will receive $22 million of the $43.75 million claimed under the reinsurance contract and all sums claimed in the arbitration proceedings. The write off of the residual amount will result in a $15.2 million after-tax impact on profit.
Tower chairman Michael Stiassny said that the agreement will enable the company to fully focus on its future.
“During our recent capital raise, the board indicated that real risk existed in both the process and the binary nature of the arbitration," 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.”
He added: “Tower [is] committed to addressing the legacy risks arising from the Canterbury earthquakes and the signing of this agreement is a significant step forward in removing those risks.”
According to the company, Tower Insurance continues to hold significant capital over and above the minimum regulatory requirement. As a result of this settlement, Tower would expect to hold approximately $136 million of solvency capital which represents $28 million above the Reserve Bank of New Zealand’s (RBNZ) minimum requirement. In addition, the insurer holds $39 million of corporate cash.
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