Australian insurer Suncorp has successfully placed its 2025 fiscal year catastrophe reinsurance program, maintaining its maximum event retention of $350 million for a first large event and lifting the top of its tower to $6.75 billion.
For 2024, Suncorp reduced the top of its tower by $400 million to $6.4 billion, but increased the retention by $100 million to $350 million. This year, the primary insurer has opted to keep its retention at the $350 million level, but has raised the top of its tower by $350 million to $6.75 billion.
For FY25, the main catastrophe program covers the Home, Motor and Commercial property portfolios across Australia and New Zealand.
Suncorp has maintained both the $350 million retention for a first large event and the $250 million retention for a second large event, with the coverage extending up to the $6.75 billion, including one full prepaid reinstatement.
The insurer explains that the FY25 reinsurance limit secured remains in excess of the Australia and New Zealand regulatory requirements.
Also unchanged from last year, the group dropdown covers have been purchased, which reduce the second, third and fourth event retention to $250 million. In Australia, a dropdown program continues to reduce retention for third and fourth event to $150 million.
One difference to the firm’s reinsurance protections for this fiscal year, which comes after a comprehensive review and the implementation of the Federal Government’s Cyclone Reinsurance Pool, Suncorp has decided not to renew its quota share agreement relating to the Queensland home portfolio.
In New Zealand, buydown cover (including a prepaid reinstatement) has been 100% placed to add cover between NZ$200 million and the firm’s maximum $350 million event retention. This is another change from FY24, when the buydowns were only 52% placed with an attachment point of NZD$100 million. The higher retention reflects the continued impacts of the weather events in early calendar year 2023 on both the economics and availability of reinsurance in the New Zealand marketplace.
“The cost of the FY25 catastrophe reinsurance program is expected to be broadly in line with FY24, reflecting changes to the structure of the program, including the removal of the Queensland quota share, and increased exposure from growth in the portfolio, largely offset by improved reinsurance market conditions,” says the firm.
Suncorp anticipates that its FY25 natural hazard allowance will rise to $1.565 billion, up from FY24’s $1.36 billion, reflecting unit growth, continued inflationary pressures across the insurance industry, and increased risk retention resulting from the changes to the structure of the reinsurance program.
The insurer is set to release its FY24 results in mid-August, but has revealed that the group natural hazard experience for the period is estimated to be roughly $1.23 billion against a budget of $1.36 billion.
Steve Johnston, Chief Executive Officer, Suncorp Group, commented: “It is pleasing to see stability return to global reinsurance markets after three years of disruption. Reinsurance is a major input cost to the price of insurance products and this, along with broader economy-wide inflation, have driven up the cost of insurance premiums for customers in Australia and New Zealand.
“With the completion of the Bank sale scheduled for 31 July and the reinsurance program successfully renewed, we will now be in a position to consider other reinsurance covers that may be appropriate.”
