Suncorp CEO Patrick Snowball has described negotiations with reinsurers over its July 1 renewal as a “Mexican stand-off”.

Mr Snowball told investors at a briefing last week that all eyes are on its renewal as the first big local carrier to renew its catastrophe covers since the natural disasters earlier this year.

He says the outcome of the reinsurance negotiations – which are being led by commercial insurance CEO Anthony Day – will have a significant impact on profits for the 2012 financial year.

While he was tight-lipped about how negotiations were proceeding, Mr Snowball said the company will update the market once the program is finalised.

He says Suncorp has been pushing through price increases of 10% across its buildings and contents products since February for new business and since April on renewals, as well as increases in commercial rates, in order to cover the expected uplift in reinsurance costs. He says 10% “covers quite a substantial increase” in the price of reinsurance.

He says Suncorp is aiming for an increase of 3% in its insurance margin in 2012, which should be achievable “unless [the reinsurance price] blows through the roof completely”.

Group CFO John Nesbitt says Suncorp is “in a strong position to be flexible around the structure of the reinsurance program, particularly in the event that pricing at the lower level of the program is uneconomic”.

“We expect there will be more than enough capacity across the program,” he said.

Suncorp has spent $242 million on additional reinsurance covers to protect it against catastrophes for the remainder of the financial year.

So far in 2011 the two Christchurch earthquakes have cost it $2.1 billion in gross claims, with $500 million of that attributable to September’s quake and $1.6 billion to the March earthquake, which is the largest gross claim in Suncorp’s history. After reinsurance, the two earthquakes had left Suncorp with a total net cost of $NZ120 million ($92 million).