Brought to you by:
ARGIS
ARGIS

Suncorp BI claims provision rises to $195 million

Facebook Twitter LinkedIn Google

Suncorp has increased its total provision for COVID-related business interruption claims to $195 million after estimating Victoria’s second lockdown could have a much greater impact than earlier closures.

The insurer says it is “taking into account the breadth and depth of the Victorian lockdown” and now expects to recognise a further $125 million pre-tax provision in the first half of the current financial year, assuming no further material outbreaks.

The group included a provision of $70 million for potential COVID-19 business interruption claims in June 30 financial year figures released last month.

Suncorp and other companies are awaiting the NSW Court of Appeal judgement on the Insurance Council of Australia business interruption test case, heard on October 2, which considers wordings that refer to the Quarantine Act.

The insurer says it remains confident the intention of its policies is clear and they don’t respond to pandemic, but the provisioning takes into account the event of an unfavourable judgement.

“Given the group’s prudent reserving approach, the industry test case outcome is not expected to affect the total BI provision,” Suncorp says today.

The provision takes into account industries and geographies affected by the pandemic and factors that could mitigate claims costs, including government stimulus measures, rental reductions and alternative revenue streams.

The impact of COVID-19 across the general insurance portfolio is expected to be “broadly neutral” for the first half. Other influences include a short-term reduction in motor claims frequency, virus relief measures and costs from on-shoring critical business processes.

Suncorp today also flags that Liability Adequacy Test figures for AAI, to be published in a regular Australian Prudential Regulation Authority report on November 26, will show a deficit of $173 million for the September quarter.

It says the figures show “significant seasonality” and the deficit is expected to have been substantially unwound by December 31 and to be profit neutral for the financial year.