Global reinsurance markets have stabilised, says Suncorp

Australian insurance giant Suncorp believes that global reinsurance markets have stabilised, while explaining that it has raised prices to cope with the higher costs of reinsurance, elevated natural catastrophe and weather claims, as well as inflationary factors.

Suncorp has again reiterated that even after a costly first-half of its fiscal year where its natural hazard claims reached around 45,000 for the six month period, the insurer has not made any recoveries on its private reinsurance coverage, with full limits remaining available for H2 FY 2024.

A significant proportion of Suncorp’s $568 million of natural hazard claims for the first-half of its fiscal year came in December, with loss events above $10 million accounting for $356 million of the total, the insurer said today.

Among that was $55 million of retained loss from cyclone Jasper, against which the Cyclone Reinsurance Pool provided recoveries of $14 million.

Overall, Suncorp was under budget on nat cat claims in the period by $112 million, but as its reinsurance attachment had risen significantly and the aggregate excess-of-loss arrangement non-renewed due to its cost, the insurer has not had its usual level of reinsurance support for severe weather and catastrophe activity.

The nat hazard budget remains $1.36 billion for the full fiscal year, so Suncorp does have plenty of buffer for the second-half, but this is really allowing for higher retentions, so costs go to the bottom line and are being passed on to consumers.

Suncorp Group CEO Steve Johnston highlighted some of the challenges facing the insurer and its customers, explaining that some reinsurance costs have been passed onto consumers, “The growth in gross written premiums is also reflective of targeted price increases in response to higher reinsurance costs, ongoing supply chain inflationary pressures resulting in higher repair costs for cars and homes, and an elevated level of natural hazards.

“We remain acutely alert to the affordability challenges facing customers and continue to focus on driving greater efficiencies in our own business.”

Suncorp has reinsurance strategy in its strategic priorities for 2024 to 2026, as the company looks to buy protection as efficiently as possible.

“Our teams right across the country have been supporting customers impacted by the severe weather events experienced across the east coast of Australia since November 2023. Over the half, these resulted in around 45,000 claims at a cost of $568 million, which remains within our natural hazard allowance of $1,360 million for the 2024 financial year. While our business remains well protected through our comprehensive reinsurance program, more needs to be done to protect people before disaster strikes,” Johnston said.

Suncorp has been steadily raising its natural hazard allowance, which has now doubled since 2019, while at the same time the firm’s reinsurance premiums ceded have grown from $1.1 billion to $1.5 billion.

Over the last two years, the insurer puts natural hazard claims costs and reinsurance pricing as two key reasons that the average cost per home insurance policy is up by 7% and motor by 15%.

That reinsurance premium figure has now stabilised over the last two years, but it’s important to also note Suncorp had to raise its attachment by $100 million and could not economically renew its aggregate catastrophe treaty at its last renewal.

While stable is a good starting point, the insurer will be hoping for improved terms and conditions when its next reinsurance renewal is due, which will be at the mid-point of 2024. But natural hazard experience over the coming months will be a key driver for renewal terms