Reinsurance News

Analysts say December Sydney hailstorm could cost re/insurers AU$2bn

30th January 2019 - Author: Luke Gallin

The total loss to insurers and reinsurers from the major hailstorm that struck Sydney and the surrounding area in December 2018, could be as much as AU$2 billion (US$1.44bn), according to analysts.

Hail from the Feb 18th 2017 Sydney stormAnalysts at Firetrail Investments, an Australian investment management firm, have said that the hailstorm and severe convective weather outbreak that hit the Sydney, Central Coast and South East Queensland region of Australia, could cost re/insurers between AU$1.5 billion (US$1.08bn) and AU$2 billion (US$1.44bn).

The Insurance Council of Australia recently announced a raised loss estimate of AU$871 million, based on the latest claims count.

However, analysts warn that the total loss could double once all claims have been reported and paid, which would make it one of the costliest weather events of the past 30 years, and possibly the most damaging hailstorm in Sydney for 20 years.

The analysts note that for large Australian insurers IAG and Suncorp, which have a 60% – 70% share of the New South Wales motor and home markets, an event of this magnitude could be damaging to their full-year 2019 profits.

However, analysts state that both companies utilise reinsurance protection to offset the costs of catastrophe events.

“The combination of various reinsurance protections mitigates a substantial proportion of the direct costs of the hail storm. We believe indirect impacts are more relevant for ongoing profitability,” said analysts.

Adding that the “net costs of this event are capped at $169m for IAG and $250m for Suncorp, despite the gross cost likely being multiples of this amount.”

Firetrail also highlights the potential for a major loss from this event to drive higher reinsurance pricing in Australia, but does say that the diversification it provides large reinsurance companies suggests that any rate rises would be minimal.

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