Suncorp reveals reinsurance program changes as it braces for further flood claims

Suncorp Group has detailed the placement of its FY23 reinsurance program. It reveals the natural hazard allowance for FY23 is expected to increase to $1.2 billion from $960m in 2022, reflecting the changes to the reinsurance program and the FY22 hazard experience.    

The Australian insurance giant has also provided an update on the weather event impacting New South Wales and parts of South-East Queensland.

The Insurance Council of Australia (ICA) has declared a ‘significant event’ for regions of New South Wales impacted by significant storm and flooding over the past few days. 

The impact of flooding has been felt most significantly in communities surrounding the Hawkesbury and Nepean Rivers, but it remains an unfolding weather event.

Suncorp Group CEO Steve Johnston said: “Our teams are in place to receive claims and will move into affected areas when the weather event concludes. Current claims volumes are low but we expect that to increase over coming days.”

Johnston said that in FY22 the Group dealt with 35 separate events and over 120,000 natural hazard claims, at an expected cost of around $1.1 billion, net of reinsurance recoveries. This is in line with previous guidance and reflected the prevailing La Niña weather pattern.

“Our teams remain focused on supporting customers and communities impacted by these events, including the devastating flooding across South-East Queensland and Northern New South Wales earlier this year.

“Our claims teams are making good progress in addressing these claims although we recognise it will take some time before all homes are rectified. Around 1000 additional staff have been recruited to fast track the repairs.”

FY23 reinsurance placement

Suncorp’s reinsurance strategy aims to achieve the optimal balance between the cost of the program and acceptable levels of earnings and capital volatility.

While the overall structure of the program remains similar to prior years, changes have been made to reflect the material hardening of the global reinsurance market following elevated natural hazard activity in recent years.

The group’s maximum event retention has been maintained at $250m 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.

One prepaid reinstatement covers losses up to $6.8 billion and two further prepaid reinstatements cover losses up to $500m.

Drop-down aggregate protection

In addition to the main catastrophe program, the group has purchased dropdown aggregate protection in the form of three dropdowns. Dropdown 1 and Dropdown 2 are unchanged from FY22.

For Dropdown 3, the attachment point has increased from $50m to $100m, with the amount of cover provided therefore reducing from $100m to $50m.

The aggregate excess of loss cover has also been renewed, with the attachment point increasing from $650m to $850m and the amount of cover provided remaining at $400m. Additionally, the per event deductible has increased from $5m to $10m.

Total reinsurance premiums for FY23 have increased significantly as a result of the hardening global reinsurance market.

The Group has historically maintained significant capital buffers and says its balance sheet is well placed to support the changes to its reinsurance program.

“Suncorp continues to advocate for a more resilient Australia to help underpin insurance accessibility and affordability into the future,” said Johnston.

“While more needs to be done we are pleased to see progress is being made with the new Federal Government’s $200m a year Disaster Ready Fund, and the Queensland Government’s Resilient Homes Fund.”