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.

“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.