Australian primary insurer Suncorp Group has revealed that catastrophe losses resulting from the recent flooding in the city of Townsville, Queensland have triggered its Natural Hazards Aggregate Protection (NHAP) reinsurance program.
The company explained that, while it is still too early to estimate the gross costs of the flooding, its losses will be capped at AUD $97 million (US $69 million) due to its aggregate reinsurance coverage.
Any further losses that qualify as natural catastrophe losses will now be covered by Suncorp’s program until its $300 million of coverage is fully eroded.
Steve Johnston, Chief Financial Officer at Suncorp, explained what this would mean for the company’s exposure going into the second half of the 2019 financial year.
“If you assume second half attritional events are similar to the $173m in the first half and we do not exceed the $300m of cover under the NHAP, then full year natural hazard costs would land $130m over the allowance – a significant improvement on the first half outcome.”
This protection limited the financial impact of the event on Suncorp to no more than $250 million (pre-tax).
Suncorp’s commentary on the Townsville event came as part of its H1 2019 results, which showed that the company exceeded its natural catastrophe allowance for the period by $220 million.
At approximately $580 million, Suncorp’s H1 catastrophe losses were up $167 million on the previous year and resulted in a 44.7% decrease in H1 net profits year-on-year.
In response, the insurer plans to purchase $200 million of additional catastrophe reinsurance stop loss cover and increase its yearly natural hazard allowance by $100 million to $820 million.
Suncorp experienced four events in H1 2019 that resulted in claims costs above $10 million (not including the Townsville floods), which produced combined losses of $407 million.
With the addition of $173 million losses from other natural hazards attritional claims, the company’s total catastrophe losses for the period were $580 million.
Australian publication Courier Mail reported this week that the Townsville flooding could trigger reinsurance protection for a number of exposed insurers, including RACQ, Youi, Allianz and AIG.