Tower has become the first New Zealand company to take a fully risk based approach to pricing policies for Nat CAT.

The insurer recently attracted the headlines when it billed a homeowner in the Christchurch suburb of Strowan Merivale NZ$13,000 ($8,550) a year from NZ$2,300 previously. The bill is more than $1,000 a month. The owner moved instead to another insurer who charged a more modest amount. Still, premiums are on the way up as other firms move to partial risk-based cover, reports Newstalk ZB.

Other insurers could soon adopt the fully risk based approach too, indicating that from now on the insurance liability will no longer be spread across the whole country.

This has been signalled for a while and it comes after a string of events that have hit the insurance sector. Earthquakes in Christchurch have cost insurers NZ$21bn and that doesn’t include the NZ$12bn EQC has paid out.

But it’s not just earthquakes that concern the companies, its weather events as well. So if a person has a beachfront property or lives in a flood prone area or an area that attracts wildfires, then he has to brace himself for some big bills.

The downside to the fully risk based approach is that if insurance gets too expensive, there’s a risk that people will stop insuring altogether which will hit taxpayers if something goes wrong.