Australia’s Suncorp Group published details on its FY25 reinsurance program on Friday, which CEO Steve Johnston says aims to “balance costs, earnings, and capital volatility”.
The Queensland-headquartered insurer’s main catastrophe programme covers Home, Motor, and Commercial property portfolios across Australia and New Zealand.
It maintained its maximum event retention at AU$350m (US$236m) for the first large event, with its FY25 main programme providing reinsurance covers for losses between AU$350m and AU$6.75bn. The upper coverage limit reflects a slight increase from the AU$6.4bn of cover it secured in FY24.
In line with last year, the Group has maintained dropdown covers to reduce retention for the second, third, and fourth event events to AU$250m across Australia and New Zealand. It also renewed dropdown covers for Australia to reduce retention for the third and fourth event retention to AU$150m.
Suncorp has decided not to renew its quota share agreement for the Queensland home portfolio “following a comprehensive review and the implementation of the Federal Government’s Cyclone Reinsurance Pool.”
In New Zealand, 100% of buydown cover, including a prepaid reinstatement, has been placed to provide cover between NZ$200 million and the Group’s maximum event retention. This compares to FY24, where buydowns were only 52% placed with an attachment point of NZ$100 million.
“The increase in retention reflects the continued impacts of the weather events in early calendar year 2023 on the economics and availability of reinsurance cover in the New Zealand market,” Suncorp said.
Renewal impact
Suncorp said the cost of its FY25 catastrophe reinsurance program is expected to be broadly in line with FY24.
This reflects changes to the program structure, including the removal of the Queensland quota share and increased exposure from portfolio growth, which were largely offset by improved reinsurance market conditions.
On this, Johnston said, “it is pleasing to see stability return to global reinsurance markets after three years of disruption.”
The Group’s natural hazard allowance for FY25 is expected to increase to AU$1.565bn from AU$1.36bn in FY24 due to unit growth, continued inflationary pressures, and increased risk retention from changes to the reinsurance program structure.
The Group also strengthened reserves on some 1H24 events in 2H24, primarily due to a large event in late December, with adverse development resulting from supply chain pressures and the timing of claims being lodged during the holiday period.
“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% to 12% range,” the insurer added.
The FY25 reinsurance program changes are not expected to have a material impact on the Group’s target capital.
Other updates
In June, Australia’s Federal Treasurer, Jim Chalmers, approved ANZ’s acquisition of Suncorp Group’s banking arm for AU$4.9bn (US$3.25bn).
The deal, expected to finalise this month, follows nearly two years of scrutiny and regulatory hurdles, including an overturned ACCC decision.
“With the completion of the Bank sale scheduled for 31 July and the reinsurance program successfully renewed, we will now be in a position to consider other reinsurance covers that may be appropriate,” Johnston said.
The Group will announce its FY24 financial results release on 19 August 2024. Suncorp expects FY24 underlying margins to be around the middle of the 10% to 12% range. In investment income, mark-to-market movements across asset classes were broadly in line with previously communicated sensitivities, the Group added.
