Sydney hail loss rises, as IAG & Suncorp estimate up to AU$370m

The final insurance and reinsurance bill from the severe summer hailstorm that struck Sydney and parts of New South Wales, Australia on February 18th 2017 will rise further, as evidenced by initial estimates from insurers IAG and Suncorp.

Last week we reported that the Insurance Council had increased its estimate of insurance and reinsurance losses to AU $186 million (US$140.6 million).

Now, Australian insurance giants IAG and Suncorp have between them estimated that the bill could be somewhere from AU $310 million to as much as AU $370 million (US$280m).

Major convective and hail storm related insurance losses have been impactful in the Sydney and New South Wales region of Australia  in recent years, with some losses falling to some collateralized reinsurance players and ILS funds due to their participation in the reinsurance programs of the largest regional players.

IAG said that its estimate is given with a degree of uncertainty still, as claims continue to be received, now totaling over 20,000. The insurer said that it estimates its loss from the hailstorm will be around AU $160 million. and said that after allowance for reinsurance its maximum possible net exposure is AU $200 million.

Suncorp meanwhile said that it has received 11,000 claims from the hailstorm and estimates a loss of between AU $150 million to AU $170 million.

As a result of the toll of this hailstorm event, both of these insurers are eating further into their allowance for claims from natural catastrophe losses.

IAG said that its financial year nat cat claims stand at AU $650 million as at the end of February 2017. IAG’s allowance for natural catastrophe claims is AU $680 million, which extends to AU $776 million through its specific natural perils reinsurance cover of AU $96 million of protection above AU $680 million. It seems certain that layer of cover will be eaten into to some degree this year.

IAG also has its sideways aggregate reinsurance cover which pays out claims alongside the company and supports its ability to pay claims. It’s assumed that this layer will see some claims due to this hailstorm event as the excess per loss is just AU $20 million.

Suncorp said that including the hail event its natural peril losses in the current fiscal year have reached between AU $610 million to AU $630 million.

Suncorp’s aggregate reinsurance layer now looks very likely to begin paying out in the remainder of this financial year, with it providing AU $300 million of cover once the retained from a retained attachment of $460 million of losses. At 28 February 2017, Suncorp’s losses that qualify under this reinsurance layer are seen at between AU $420 and AU $440 million.

So once again the two major Australian insurers looks set to make increasing use of their reinsurance cover as they move through the final months of their financial year, with the chances of the ILS funds and collateralised reinsurance market taking a share likely rising all the time.

With IAG and Suncorp alone seeing their losses from this Sydney hailstorm at up to AU $370 million the final industry-wide toll is likely to be higher still, reflecting the serious impacts that convective type weather has in the New South Wales region.