Suncorp shores up reinsurance as it prepares for NSW floods claims

Insurance giant Suncorp has shored up its reinsurance arrangements for the current financial year as it prepares to deal with claims relating to the latest flooding in NSW and South-East Queensland.

“Our teams are in place to receive claims and will move into affected areas when the weather event concludes,” Suncorp chief executive Steve Johnson said.

“Current claims volumes are low, but we expect that to increase over coming days.”

Johnston confirmed that natural hazard claims last financial year cost it around $1.1 billion, in line with expectations, and raised its natural hazard allowance to $1.16 billion reflecting its experiences from last year, but it will come at a cost.

Camden’s BP was engulfed on Sunday.Credit:Dean Sewell

“Total reinsurance premiums for FY23 have increased significantly as a result of the hardening global reinsurance market,” QBE said.

In a note to clients this morning, UBS analyst Scott Russell said the news was timely given the recent weather activity over greater Sydney – which is too early to quantify. “We think the successful reinsurance renewal and guidance iteration clears a major hurdle for investors,” he said.

But Russell warned that the lift of its natural hazard budget to $1.16 billion could be too light if “elevated weather activity” persists.

“If FY23 were to experience similar weather pattern events to FY22, we estimate the new arrangements would produce net losses around $200 million higher versus the prior corresponding period,” he said.

There have been concerns that reinsurers are losing interest in Australia because of the escalating risk profile and that higher costs will need to be passed onto customers in the form of higher premiums.

Suncorp’s Johnston has previously called on the government to make insurance tax-free due to premiums soaring in the face of repeated natural disasters, as the insurer takes control of its supply lines in the face of rising inflation.

Johnston claimed GST, stamp duty and the emergency services levy make up between 30 and 45 per cent of premiums sold in Queensland and NSW.

The recent east coast floods exposed the creeping affordability crisis of insurance premiums in communities that are affected by extreme weather, with thousands of uninsured people grappling with how to rebuild their homes.

On Monday, Johnston said he was pleased to see that progress is being made with the new federal government’s $200 million a year Disaster Ready Fund, and the Queensland government’s Resilient Homes Fund.

Suncorp said it was making good progress on flooding claims from earlier this year with around 1,000 additional staff recruited to fast track repairs.

On Monday, Suncorp said its maximum event retention had been maintained at $250 million with the upper limit increased from $6.5 billion to $6.8 billion which covers the home, motor and commercial property portfolios across Australia and New Zealand.

Suncorp expects to maintain its insurance margin in the 10 to 12 per cent range despite the rising reinsurance costs.

The insurer’s shares were trading 1 per cent higher at $11.05 on Monday afternoon.

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