Australian insurer Suncorp has secured an additional five-year aggregate reinsurance cover that will provide AUD 800 million of protection annually, and up to AUD 2.4 billion of total protection over the period beginning June 30, 2026.
The attachment point for the aggregate cover is indexed to Suncorp’s growth in exposure over time and is set at AUD 1.85 billion for the 2027 financial year.
This represents an attachment point AUD 50 million above the expected natural hazard allowance (NHA) for FY’27 of AUD 1.8 billion, excluding claims handling expenses (CHE) and profit commission.
Including CHE and profit commission, the FY’27 NHA is expected to be AUD 1.85 billion, compared with AUD 1.77 billion in FY’26.
The aggregate cover is expected to effectively cap natural hazard costs at the attachment point in approximately 90% of scenarios in any given year, explained the insurer.
Additionally, the FY’27 agreement includes protection previously provided by Suncorp’s existing dropdown arrangements below AUD 350 million. The agreement is expected to reduce the overall volatility in net claims costs, resulting in a one-off capital release of approximately $100 million through a modestly lower capital target.
In an update, the insurer has said that the natural hazard experience for FY’26 is now expected to be approximately $250m above the FY26 allowance, directly the result of H1’26 going AUD 453 million over the FY’26 allowance, subject to there being no further material events.
For reference, Suncorp, for its 2026 reinsurance renewal, secured core catastrophe protection covering losses from AUD 500 million to AUD 6.3 billion, while also arranging a structured, multi-year solution that lowers its retention to AUD 350 million for both the first and second events.
Jeremy Robson, Acting Chief Executive Officer of Suncorp, explained that this cover is an “important component” of the insurer’s reinsurance program.
This is also a direct result of the harder reinsurer market over the past few years, which has presented an opportunity to add resilience to Suncorp’s natural hazard allowance.
Robson added, “In order to further optimise the economics, the attachment point for the new cover is slightly above the natural hazard allowance. The improvement in market conditions have now made the aggregate cover a viable part of the overall program.”
The economic cost of the cover is expected to be broadly neutral relative to the modelled expected recoveries and profit share commissions. The Underlying ITR margin outlook is expected to be unchanged, remaining at the upper end of the 10-12% range.
Suncorp explained that it is continuing to progress the renewal of the remainder of its reinsurance program for FY27, including its main catastrophe cover, which is on track to be finalised by June 30th, 2026.
Robson said, “This new reinsurance arrangement reinforces the sustainability of our commitment to our customers, as well as optimising long-term shareholder value. The underlying margin outlook remains unchanged at the upper end of our target range but with significantly improved resilience and reduced volatility in earnings. This additional aggregate cover, in combination with the remainder of our reinsurance program, increases the resilience of our business to natural hazards and the related uncertainties for the next five years.”
Lastly, Suncorp expects FY’26 GWP growth of approximately 3%, which has been impacted predominantly by the ongoing weakness in the NZD, which is expected to reduce growth by ~0.41 percentage points in AUD terms, and the impact from the improved risk mix shifts in Home.
