Tower Insurance capital raise, reinsurance deal reassure AM Best

AM Best has removed New Zealand’s Tower Insurance from under review with negative implications after a capital raise and a  settlement agreement with Peak Re.

AM Best had placed the ratings of Tower Insurance under review with negative implications on Aug. 16, 2017, due to the group’s relatively weak balance sheet strength.

The major concern at that time was that the group’s balance sheet was very susceptible to the reserve risks in relation to the open claims for the Canterbury earthquakes and the dispute over an adverse development cover with Peak Re related to the February 2011 earthquake.

Since then, the group has completed a capital raise of approximately NZ$ 65.3 million ($47.8 million) and has recently entered into a settlement agreement with Peak Re. Although this settlement will result in an after-tax write-off of NZ$ 15.6 million for fiscal-year 2018, AM Best expects the group’s balance sheet strength to remain very strong, given its strengthened capital base.

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