Suncorp has completed its 2023/24 (FY24) reinsurance program, making key changes as catastrophe protection cost increases after last year’s floods. 

The insurer has at the same time raised its natural hazard allowance estimates, to $1.36 billion from $1.16 billion in 2022/23, to reflect the increased retention arising from its reinsurance program changes and the inflationary claims environment. 

“The hardening reinsurance market results in both increased reinsurance premiums and increased risk retention for FY24,” Suncorp said. 

“Increased risk retention impacts both the natural hazard allowance and the amount of capital required to be held by the Group.” 

As a result Suncorp says the combined cost of the catastrophe reinsurance premiums and the natural hazard allowance is expected to increase by about $250 million or 12% from the last financial year. 

“This reflects the hardening global reinsurance market and the impact of adverse weather events through the La Nina cycle in recent years across Australia and New Zealand,” Suncorp said. 

For the reinsurance program the maximum event retention has been raised to $350 million for a first large event from $250 million in the last financial year. 

Its main catastrophe program – which covers the home, motor and commercial property portfolios across Australia and New Zealand – will provide protection for losses between $350 million and $6.4 billion and includes one full prepaid reinstatement. In 2022/23 the program covered up to $6.8 billion. 

The insurer has also moved to address its risk exposure in Queensland, renewing its quota share arrangement to cede 30% from its home portfolio in the state. 

“Suncorp maintains strong market share within this market and the quota share reduces concentration risk in this region,” the insurer says. 

However, the insurer has decided not to renew its aggregate excess of loss cover after “comprehensive” modelling on its cost and benefits. 

Suncorp Group CEO Steve Johnston says other forms of reinsurance cover, including a whole of account quota share, were considered and analysed. 

“We believe the cover that has been placed provides the best outcome, balancing optimal returns with an acceptable level of volatility,” he said.