Suncorp Group, one of the largest insurance carriers in Australia, said this morning that despite the widespread region impacted by flooding in the country over the last two weeks, it expects the floods to be categorised as a single event for reinsurance purposes.
The latest claims estimate from the Insurance Council of Australia stands at almost A$500 million, from 33,152 filed, as of this morning.
Suncorp said that the rainfall and flooding across New South Wales, South East Queensland and Victoria have now driven over 7,600 claims to it and this figure is expected to rise as customers return to their homes.
Suncorp said that around three-quarters of claims from the flooding are from New South Wales, with around 20% from Queensland and the rest from Victoria and the ACT, while the severity of claims varies significantly between regions.
Based on the claims it has received to-date and anticipates receiving, Suncorp estimates the net claims cost it suffers will be between $230 million and $250 million.
$250 million is where Suncorp’s catastrophe reinsurance program kicks in, so that is where losses will be capped.
Importantly, given the wide region affected and the number of days rainfall and flooding occurred over, Suncorp says it expects the majority of the rainfall and flooding claims will be counted as part of the same catastrophe event for reinsurance purposes.
That is important for Suncorp’s ability to claim, as if the losses were split across multiple cat events, for reinsurance, its ability to claim any recoveries from the main program would be greatly reduced.
Suncorp, like its competitor IAG, has also highlighted that it expects further erosion of its aggregate reinsurance deductible due to the flooding.
Suncorp said that while its full per-occurrence catastrophe reinsurance limit remains available and also its dropdown aggregate reinsurance covers, its Aggregate Excess of Loss reinsurance cover has already seen its deductible eroded by $370 million at the end of February.
The aggregate XoL treaty attaches excess of $650 million and then provides $400 million of reinsurance cover.
The floods will further erode that deductible, but at this stage it looks unlikely to attach the agg layer, with a per-occurrence reinsurance claim the more likely at this stage, alongside the quota share recoveries Suncorp will also be making.
Suncorp Group CEO Steve Johnston commented, “Suncorp continues to work with our customers, particularly in the hardest-hit areas of the Mid-North Coast of NSW and Western Sydney.
“Floods too frequently devastate communities across Australia, which is why as a country we must address this risk. Unfortunately, many homes in Richmond, Windsor, Penrith, Port Macquarie and Taree are in medium to very high flood risk areas.
“As a country, we need to address how we can protect homes in flood-prone regions through government investment in mitigation infrastructure. We must also improve planning decisions to ensure we are not building new homes in high-risk areas.”