Suncorp seals renewal of reinsurance program
Suncorp seals renewal of reinsurance program | Insurance Business New Zealand
Insurance News
Suncorp seals renewal of reinsurance program
Its structure and impacts are outlined
Insurance News
By
Roxanne Libatique
Suncorp Group (Suncorp) has renewed its reinsurance program – now for the 2024 financial year (FY24).
Suncorp’s reinsurance strategy aims to balance the cost of the program and acceptable levels of earnings and capital volatility. Therefore, the updated program is expected to maintain the balance in the context of the global reinsurance market’s material hardening in recent years.
Suncorp CEO Steve Johnston said the updated reinsurance program will protect the group throughout FY24.
“We continue to see a significant reassessment of risk by our reinsurance partners, which reflects elevated natural hazard activity in recent years both globally and in Australia and New Zealand. This, combined with broader inflationary pressures across the economy, continues to impact the cost of reinsurance across the industry,” Johnston said. “This renewal again underscores the challenges facing the insurance industry in Australia and New Zealand. If the proposed sale of Suncorp Bank to ANZ is approved, Suncorp would become a dedicated insurer at a time when the value of insurance to the economy and the public has never been greater.”
Reinsurance program structure for FY24
Suncorp’s maximum event retention increased from $250 million in the 2023 financial year (FY23) to $350 million in FY24 for a first large event and $250 million for a second large event.
The main catastrophe program covers the home, motor, and commercial property portfolios across Australia and New Zealand, providing protection for losses between $350 million and $6.4 billion (FY23: $6.8 billion) and includes one full prepaid reinstatement. At $6.4 billion, the FY24 limit remains in excess of the Australia and New Zealand regulatory requirements.
Suncorp also renewed its quota share arrangement ceding 30% from its Queensland home insurance portfolio, boasting strong market share and the quota share reducing concentration risk in the region. Additionally, the insurer maintains comprehensive reinsurance cover for casualty and other property risk.
“We believe the cover that has been placed provides the best outcome, balancing optimal returns with an acceptable level of volatility,” Johnston said.
Impacts of reinsurance program renewal
Suncorp expects the combined cost of the FY24 catastrophe reinsurance premiums and the natural hazard allowance to increase by around $250 million (12% from FY23) due to the hardening global reinsurance market and the impacts of extreme weather events through the La Niña cycle in Australia and New Zealand in recent years.
The insurer also expects the natural hazard allowance to increase to $1,360 million in FY24 (FY23: $1,160 million) due to increased retention following the changes to the reinsurance program and the inflationary claims environment, partially offset by the ceding of cyclone risk to the CRP.
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