Australian primary insurance group Suncorp has reported that its catastrophe losses from the first-half of its fiscal year have exceeded its budget, resulting in a $399 million erosion of its aggregate reinsurance deductible.
That’s before accounting for the recent severe flooding in New Zealand, that Suncorp says its losses from will be capped at NZ $50 million, despite reporting over 8,000 claims from the event, suggesting a recovery is going to be made from its New Zealand focused reinsurance arrangements.
The insurer cites “elevated natural hazard activity” through its first-half to the end of December 2022.
“The prevailing La Niña weather pattern across Australia and New Zealand led to eight separate weather events and around 53,000 natural hazard claims for 1H23,” Suncorp reported.
Because of these catastrophe and severe weather losses Suncorp said it has exceeded its natural hazard allowance by $99 million in the first-half of its fiscal year.
Suncorp has an aggregate reinsurance cover to protect it against exactly these kind of severe weather losses, with the eight weather events driving $479 million of losses.
The aggregate reinsurance trigger is at $850 million of losses for this fiscal year, as that attachment rose at the insurer’s latest renewal.
For an event to qualify under its aggregate cover it must be above $10 million retention, so the erosion of the aggregate excess-of-loss reinsurance amounts to $399 million for the first-half of its 2023 fiscal year.
In the last fiscal year, Suncorp reported benefiting from “significant reinsurance recoveries” as its losses ran well above budget.
This year, the insurer’s full year natural hazard allowance is $1.16 billion. Losses reached $679 million for the first-half, so $99 million above the first-half budget of $580 million so far.
Suncorp also noted the potential for its reinsurance costs to rise, with the market now harder.
Commenting on its loss trends and the reinsurance market, the insurer reported that, “The Group’s modelling of natural hazard risk indicates a modest upward trend in the frequency of natural hazard events but the more recent La Niña conditions appear to be turning neutral.
“However, indications are that global reinsurance markets remain in a hardening cycle with higher return hurdles and capital constraints impacting the cost of reinsurance and risk retention.”
As a result, Suncorp expects increased costs from reinsurance in 2023, which it sees as a headwind over the medium term.
Suncorp cat losses exceed budget again, erodes 47% of aggregate deductible was published by: www.Artemis.bm
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