Suncorp has finalised its reinsurance program for this financial year and says underlying margins for the past 12 months should be in the middle of its expected range...

The main catastrophe program provides cover for the home, motor and commercial property portfolios across Australia and New Zealand, with protection for losses between $350 million and $6.75 billion. The upper limit has been raised from $6.4 billion last year.

In line with last year, group drop-down covers have also been purchased that reduce the second, third and fourth event retention to $250 million, and the Australian drop-down program continues to reduce retention for a third and fourth event to $150 million. 

Suncorp has not renewed a quota share agreement for the Queensland home portfolio, due to the federal government’s cyclone reinsurance pool, and says it has also improved risk selection and pricing.

In New Zealand, an increased retention reflects the continued impacts of weather catastrophes early last year on the economics and availability of reinsurance in that market.

The program’s cost is expected to be broadly in line with last year, reflecting “changes to the structure of the program, including the removal of the Queensland quota share, and increased exposure from growth in the portfolio, largely offset by improved reinsurance market conditions”.

“It is pleasing to see stability return to global reinsurance markets after three years of disruption,” group CEO Steve Johnston said.

Suncorp’s natural hazard allowance for this financial year is expected to increase to $1.565 billion from $1.36 billion, with the actual perils experience for last year estimated at about $1.23 billion. 

The increase reflects unit growth, inflationary pressures and increased risk retention resulting from reinsurance changes. 

Meanwhile, the insurer says a late-December weather event has resulted in some second-half reserve strengthening, reflecting supply chain pressures and a holiday period effect on the timing of claim lodgements.

Suncorp expects underlying margins for last financial year to be around the middle of the 10%-12% range. Full-year financial results will be released on August 19.