UPDATED: Tower's [NZX: TWR] minimum solvency margin has been reduced by $30 million as the Reserve Bank relaxes the amount the insurer needs to have on hand as it progresses through its Canterbury earthquake claims.
The general insurer is now required to carry a minimum of $50 million, from a previous $80 million, to retain its insurance licence from the central bank, it said in a statement. According to Tower's website it carried a group solvency of $147.4 million at March 31, 2014. In 2010 and 2011 New Zealand's second largest city, Christchurch and its Canterbury surrounds, were devastated by three earthquakes. The cost of the subsequent rebuild has been estimated at $40 billion, according to the Reserve Bank.
Tower expects to complete all Canterbury earthquake related claims by 2015, having settled 85 percent of its cases in August. In the six months ended March 31, Tower said it has $22.1 million in claims related to the earthquake, all covered by reinsurance, while in the year ended Sept. 30, 2013 it had a gross claims of $72.2 million in relation to Christchurch.
"We're pleased that our efforts in resolving claims have been recognised and this capital will be released," said chief executive David Hancock. "We will continue to keep the RBNZ informed on the progress of our programme of work in Canterbury."
Tower has sold off its life, health and investment units to focus on general insurance, and has flagged a return of capital to shareholders once its Christchurch claims are completed.
Tower shares rose 2.7 percent to $1.92, and have gained 8.7 percent in the past year.