Sydney hail storm will trigger reinsurance payout for Suncorp

The major hail storm and severe weather outbreak that struck the Sydney and surrounding area of Australia in December will result in a reinsurance payout for insurer Suncorp, as the company says claims will exceed its program’s first event retention and are eating through its aggregate retention as well.

Suncorp had previously warned that its losses from the hail storm could result in a reinsurance claim, but has now confirmed that with 24,800 claims received from its customers the firm now expects the loss will exceed the $250 million first event retention on its reinsurance program.

The hailstorms struck the Sydney, Central Coast and South East Queensland regions of Australia on December 21st 2018, causing widespread damage to residential and commercial properties and auto’s.

Suncorp is exposed to losses in all classes of business, being one of the larger primary insurers in Australia, but the firms robust reinsurance arrangements now look set to minimise the financial impact.

The hail storm losses have taken Suncorp well over its natural catastrophe budget for the first-half of its financial year, with its allowance set at $360 million but its losses now standing at $600 million to $610 million, with this hail storm loss the largest catastrophe event of the year so far.

The hail storm will also be the largest catastrophe event of the year so far for other Australian primary insurers, such as IAG and QBE.

Suncorp noted that it also has its catastrophe aggregate reinsurance cover as well, which provides $300 million of protection for loss events greater than $10 million after aggregate costs reach $504 million.

At the end of 2018 Suncorp estimates that its catastrophe losses have eroded $415 million of the aggregate deductible, meaning reinsurance firms could be on the hook for more losses if the insurers loss from this hail storm escalates, or a further event occurs and qualifies under the aggregate tower.

The severe hail loss event is expected to result in impacts for some insurance-linked securities (ILS) funds and collateralised reinsurers that participate in the programs of the major Australian primary insurers.