Australian insurer Suncorp has finalized the renewal of its main catastrophe reinsurance program for FY21 with a similar structure to previous years.
Details of the coverage were released alongside an announcement that Suncorp will be implementing a new operating model and organisational structure to improve its core businesses and accelerate digital transformation.
The reinsurance program includes new Aggregate Excess of Loss cover that provides $400 million of cover for events in excess of $5 million once the retained cost of these events reaches $650 million.
Additionally, the vertical limit on the main catastrophe program, which covers Suncorp’s home, motor and commercial property portfolios across Australia and New Zealand was also reduced from $7.2 billion to $6.5 billion.
The lower modelled vertical limit reflects a combination of reduced exposure, particularly in commercial where Suncorp has exited unprofitable portfolios and in New Zealand where changes to the Earthquake Commission coverage has reduced the retained exposure.
The maximum event retention under the new main catastrophe program remains unchanged at $250 million, and there has been no change to the dropdown covers, which provide an additional $450 million of protection against medium to large natural hazard events.
There had been heightened speculation about what shape Suncorp’s reinsurance program would take this year, after the insurer suffered heavy losses from the Australian bushfire and hail events over late 2019 and early 2020, which also ate into its reinsurance protection.
The company said back in May that it expected the aggregate profit and loss volatility covers to be the most challenging part of its reinsurance program to replace.
It further noted that the global reinsurance market has been hardening with reinsurer capital being impacted by poor global loss experience, investment asset performance arising from COVID-19, and a hardening of the retro insurance market.
“The work we have done over the past 12 months puts us in a strong position to deal with the dual challenges of increasing natural hazard costs and a global pandemic,” said Suncorp CEO Steve Johnston.
“We entered COVID-19 with a significantly de-risked business and a strong balance sheet and through this period further strengthened our funding, liquidity and capital buffers.”
Johnston continued: “At the same time, COVID-19 has resulted in changes such as the faster adoption of digital channels by customers and new, more innovative and agile internal ways of working. It has changed our perspective on what is possible.
“We now need to seize this opportunity to speed up the execution of our priorities so we can continue to deliver for our people and customers, while growing returns and creating better outcomes for our shareholders.”
As part of a series of key operating model changes, accountability for the performance of Insurance (Australia) business at Suncorp will now be assumed by two executives.
One of these executives will focus on underwriting, distribution, brands, marketing, product design and innovation, and the other responsible for all aspects of claims management and operations.
Furthermore, the company plans to combine a number of Insurance (Australia) and Group functions to create a more streamlined and efficient organisation.
It also announced greater operational accountability within Banking & Wealth and Suncorp New Zealand and further alignment of group strategy and technology to fast-track digital and automation capabilities and opportunities.