Suncorp pays big price for claims
SUNCORP has been stung by global reinsurers after the Australian underwriter made billions of dollars in claims following a string of deadly disasters since September, ranging from floods to earthquakes.
SUNCORP has been stung by global reinsurers after the Australian underwriter made billions of dollars in claims following a string of deadly disasters since September, ranging from floods to earthquakes.Suncorp has finally locked in $5.8 billion worth of reinsurance protection for payouts linked to major disasters such as earthquakes, cyclones, storms, floods and bushfires, although its reinsurance premiums are believed to be up as much as 50 per cent.Unlike in previous years, talks with reinsurers have been dragging on for months with reinsurers demanding hefty price increases to cover billions of dollars in losses.At one stage, the Suncorp chief executive, Patrick Snowball, labelled the discussions a "Mexican standoff".Reinsurance is bought from global insurers to protect against large natural catastrophe losses. While it is often the biggest single expense for general insurers, it is crucial for capping the cost of payouts.A Suncorp spokesman confirmed the reinsurance costs were higher but declined to to be specific, citing the confidential nature of the talks.However, London-based insurance trade publication Insurance Insider has cited unnamed reinsurance sources as saying reinsurance prices across Suncorp's home, motor and commercial property portfolios have risen as much as 50 per cent.Suncorp, which operates insurance brands such as AAMI and GIO, had been bracing for a reinsurance pricing shock and had been increasing home and car insurance premiums by 10 per cent and 2.5 per cent respectively."The program we have placed for this financial year is broadly similar to last year's in terms of the protection it provides but, as expected, this protection comes at a higher price following a year of earthquakes, cyclones and floods in our region," Mr Snowball said yesterday.Rival player Insurance Australia Group locked in its annual reinsurance program at the end of December, before the worst of the disasters struck. It is likely to face huge price increases when it is due to renew its contract at the end of the year.For Suncorp, the latest program has increased protection to $5.8 billion from $5.6 billion last year. Critically, Suncorp has a slightly higher exposure to catastrophe payouts. The insurer will pay the first $250 million when it comes to disaster, up $50 million from last year.Additional cover has been purchased to reduce the retention for Suncorp's New Zealand risks to $38.5 million, down from $46 million last year.Suncorp is sticking to its previous forecast of an underlying insurance margin for the 2012 financial year of at least 12 per cent.