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20 May 2013
Suncorp’s tough stance on flood mitigation measures in Queensland – which has seen the insurer stop writing new business in Roma and Emerald until mitigation works commence – has been fuelled by the insurer’s quota share deal, a well-placed source has told insuranceNEWS.com.au.
The quota share deal – understood to be with Berkshire Hathaway – was a major part of Suncorp’s recent reinsurance renewal and has enabled the group to reduce its overweight exposure to the Queensland market.
But a key tenet of the deal is understood to include Suncorp taking steps to reduce the risk in Queensland.
Under the multi-year deal, Berkshire Hathaway will take a 30% share of net earned premiums on Suncorp’s Queensland homeowners book, and will also shoulder 30% of the book’s claims.
Merrill Lynch insurance analyst Andrew Kearnan says the quota share enables Suncorp to reduce its risk concentration in Queensland, with its homeowners book in the state representing around 9-10% of the company’s total gross written premium.
A Suncorp spokesman denies its quota share partner is behind the new hard line on Queensland flood risks.
“It was a business decision made by the company to acknowledge the fact that a lack of mitigation by local governments had put our customers at risk,” the spokesman says.
Suncorp, the major insurance provider in the area, stopped writing new business in two of Queensland’s worst flood-affected towns in May, forcing local councils to fast-track mitigation plans.
Since that time, local councils in both Roma and Emerald have moved forward with a range of proposed mitigation measures.
In recognition of Roma’s progress with its flood plans and a recent $100,000 commitment from the Queensland Government to help progress the plans, Suncorp undertook a remodelling and repricing exercise to illustrate the town’s flood risk once the proposed works are completed.
The group says a flood levee in Roma would result in home and contents premium reductions of up to 70%.
Suncorp EGM Customer Product and Pricing Natasha Fenech says the company will “continue to review new policies and premium prices as the plans progress”.
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