Suncorp is the second major Australian primary insurer to reveal a growing impact from the recent east coast low pressure storm system that affected New South Wales, Australia and to say it expects to call on its reinsurance as a result of mounting 2015 catastrophe claims.
Yesterday, IAG announced that the impact to it from claims due to the NSW storm was expected to reach AUD$250m, while the Sydney hail storm that struck a couple of days later was expected to add another AUD$50m.
As a result IAG said it would be draining one layer from its reinsurance programme, expecting “full utilisation of the reinsurance cover which provides protection of $150 million in excess of $700 million for retained perils in FY15.” IAG also said it is now nearing the attachment point for its sideways aggregate reinsurance protection.
Now, Suncorp has also revealed the impact it has suffered, saying that it expects to pay out AUD$135m net of reinsurance for the New South Wales low pressure storm system, with another AUD$50m-70m, again net of reinsurance, for the Sydney hail event.
2015 is shaping up to be an attritional year for Australian primary insurers and therefore for reinsurers, any collateralized reinsurance vehicles or ILS fund managers that participate in these insurers reinsurance programmes.
Suncorp explained; “Suncorp’s natural hazard expenses for the financial year to 30 April 2015 are in the range of $940 million to $990 million. This includes current estimates for the two NSW events and a current estimate for Cyclone Marcia being $150 million. Based on these estimates, a further event between now and 30 June 2015 will have a maximum financial impact of $120 million.”
The latest industry loss estimate from the Insurance Council of Australia, of AUD$295m, is now clearly too low for the NSW storm, so expect that to rise in coming days when the ICA next reports.
With both of these insurers looking set to call on reinsurance layers thanks to the losses from the recent events, and IAG having got close to calling on reinsurers participating in its aggregate layer, there is now a chance that some ILS fund managers could be reserving based on these estimates.
Any reserving would likely be for very small losses however, as ILS funds typically participate at higher levels in these reinsurance programmes. However in Australia some may be a little lower down the tower as they view it as an attractive diversifier for their portfolios.