Suncorp has locked in reinsurance protection for losses up to an increased limit of $6.75 billion, with the overall cost of the program expected to be broadly in line with last year given offsetting changes. 

“It is pleasing to see stability return to global reinsurance markets after three years of disruption,” group CEO Steve Johnston said today. “Reinsurance is a major input cost to the price of insurance products and this, along with broader economy-wide inflation, has driven up the cost of insurance premiums for customers in Australia and New Zealand.” 

The new protection limit remains above Australian and New Zealand regulatory requirements and compares with $6.4 billion last year. 

Suncorp says program changes include not renewing a quota share agreement for the Queensland home portfolio due to the federal government’s cyclone reinsurance pool, and improved risk selection and pricing that have boosted resilience. The company had previously ceded 30% from the Queensland home insurance portfolio to reduce concentration risk in the region. 

Suncorp maintains its maximum event retention of $350 million for a first large event and $250 million for a second, with the main catastrophe program covering the home, motor and commercial property portfolios across Australia and New Zealand. 

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. 

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.

Buy-down cover, including a prepaid reinstatement, has been 100% placed to provide cover between $NZ200 million ($182 million) and the group’s maximum event retention. Last year the buy-downs were only 52% placed with an attachment point of $NZ100 million ($91 million). 

“With the completion of the bank sale scheduled for July 31 and the reinsurance program successfully renewed, we will now be in a position to consider other reinsurance covers that may be appropriate,” Mr 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. 

“Suncorp continues to reflect input costs, including the costs of placing its reinsurance program and the natural hazards allowance, into the pricing of its insurance policies, with a view to maintaining its underlying insurance margin within a 10%-12% range,” the company said. 

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.

“This not only impacted normal claims lodgement patterns but also the duration of claims.”

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.