Australian primary insurer Suncorp anticipates the total cost of natural hazard events for H1 2024 to be approximately $568 million, which consists of six significant events during the period.
Suncorp’s natural hazard allowance for FY24 is $1.36 billion, so the insurer has used less than 50% of its budget at the halfway stage.
Breaking down the natural catastrophes impact, the November Rain and Storms caused net estimate losses of $24 million; December Hail and Rain losses hit $51 million; costs from Cyclone Jasper were $56 million; and Southern States Storms costs reached $22 million.
Additionally, the SE QLD NSW Storms cost the insurer $15 million, while the majority of the losses were driven by the East Coast Holiday Storms with a total of $212 million.
All in all, events for the insurer that were over $10 million total $380 million, with other natural hazards costs hitting $188 million.
The carrier notes that it has a comprehensive reinsurance program in place for major events, with a maximum event retention on the main catastrophe program of $350 million for the first event.
Dropdown aggregate protection provides additional cover for medium-sized events and a 30% quota share arrangement relating to the Queensland Home portfolio.
Suncorp emphasises that the full limits remain available on the its reinsurance covers going into the second half of the financial year. The Group will recover approximately $14 million as part of the reinsurance arrangements with the Federal Government’s Cyclone Reinsurance Pool, concerning Cyclone Jasper.
The insurer has also reported that in relation to ex-Tropical Cyclone Kirrily, which made landfall north of Townsville as a category 2 cyclone on Thursday evening and was declassified as a tropical low on Friday, it had received just over 500 claims from customers as at Jan 28th, almost all of which are home claims.
Steve Johnston, Chief Executive Officer, Suncorp Group, commented, “Communities in the path of ex-TC Kirrily were largely spared the worst of the wind and rain as the system downgraded and quickly headed further inland. While this means we have seen less damage than expected in the more densely populated coastal communities in North Queensland, we are seeing significant rainfall and storms in southern parts of the state, and we will be closely monitoring the movements of the system over coming days.
“Since late November we have experienced a series of extreme weather events right along the East Coast, with teams continuing to progress customer claims across Queensland, New South Wales and Victoria. As a national insurer we are leveraging our full supply chain and expanded builder panel to make emergency repairs, assess the damage and start the rebuild and recovery process. We are also continuing to ensure our teams are on the ground, meeting face-to-face with our customers in the most impacted areas, including Cairns and the Gold Coast.”
Suncorp’s preliminary update on its H1 2024 results includes top-line growth, natural hazards, investment markets and prior-year reserve strengthening.
Prior year reserves were strengthened across several portfolios in H1 2024 by a total of $107 million pre-tax, net of the impact of loss component movements.
Johnston added that the reserve strengthening was driven by the combination of a broad series of external challenges facing the insurance industry. “We have continued to see inflationary pressures from drivers such as supply chain capacity constraints and higher third-party settlements in Motor, and water damage and large fires in our Home portfolio,” he said.
Segmentwise, in Motor, $56 million of reserve strengthening was offset by a $54 million loss component release under IFRS17. The reserve strengthening was driven by higher repair costs and extended repair times associated with the tail of COVID-related supply chain issues, especially concerning third-party settlements, as well as an increased level of total loss claims. The loss component release from the 30 June 2023 position was driven by improved profitability as the inflationary-related pricing response is reflected in renewals, explains the firm.
In the Home portfolio, reserves were strengthened by $32 million, primarily driven by water damage claims. There was also strengthening across an abnormally high number of large fire claims that occurred late in FY23. Natural Hazards reserve strengthening of $32 million is mostly related to the development of the Newcastle Hail event from May 2023, along with a range of other events.
Commercial & Personal Injury experienced net strengthening of $18 million which was largely attributable to an increase in reserving on lump sum costs in Workers Compensation in Western Australia reflecting the ongoing impact of historical regulation changes, as well as a modest increase in claims in run-off long tail portfolios.
Johnston concluded, “We continue to closely manage insurance pricing to respond in line with input costs such as reinsurance and inflation on repairing homes and cars, while also being mindful of the affordability challenges facing our customers. Pleasingly, in the first half we have seen more insurance customers choosing our home and motor products, with strong unit growth in both key portfolios.”
