Suncorp purchases five-year aggregate reinsurance cover

Australian insurance giant Suncorp has entered into a five-year aggregate reinsurance arrangement commencing on June 30th, 2026, which will provide the firm with AUD $800 million of protection annually, and up to $2.4 billion in total protection across the 5-year period.

As per the announcement, the attachment point for the aggregate cover is indexed to Suncorp’s growth in exposure over time and is set at $1,850 million for FY’27.

This represents an attachment point of $50 million above the expected natural hazard allowance (NHA) for FY’27 of $1,800 million, excluding claims handling expenses (CHE) and profit commission.

Suncorp also confirmed that its FY’27 natural hazard allowance, including CHE and profit commission is expected to be roughly $1,850 million, up from $1,770 million in FY’26.

The insurer also explained that the aggregate cover is expected to effectively cap natural hazard costs at the attachment point in approximately 90% of scenarios in any given year.

Suncorp Acting Chief Executive Officer Jeremy Robson explained that this aggregate cover is an “important component of Suncorp’s reinsurance program.”

This is also a direct result of the harder reinsurer market over the past few years, which has presented Suncorp with an opportunity to add resilience to its natural hazard allowance.

“In order to further optimise the economics, the attachment point for the new cover is slightly above the natural hazard allowance. The improvement in market conditions have now made the aggregate cover a viable part of the overall program,” Robson said.

Recall, that the insurer had stopped renewing its frequency protection back in 2023, as costs rose in the hard reinsurance market.

However back in February this year, Suncorp’s executives indicated that the softening reinsurance market provides the insurer with an opportunity to reassess additional covers, which includes purchasing a new aggregate reinsurance treaty.

Furthermore, Suncorp also confirmed that the FY’27 agreement includes protection previously provided by the insurer’s existing dropdown arrangements below $350 million.

“The agreement is expected to reduce the overall volatility in net claims costs resulting in a one-off capital release of approximately $100 million through a modestly lower capital target,” the insurer noted.

In an update, Suncorp indicated that the natural hazard experience for FY’26 is now expected to be approximately $250 million above the FY’26 allowance, directly the result of H1’26 going $453 million over the FY’26 allowance, subject to there being no further material events.

Suncorp also said that the economic cost of the cover is expected to be broadly neutral relative to the modelled expected recoveries and profit share commissions. The Underlying ITR margin outlook is expected to be unchanged, remaining at the upper end of the 10-12% range.

CEO Robson, added: “This new reinsurance arrangement reinforces the sustainability of our commitment to our customers, as well as optimising long-term shareholder value.

“The underlying margin outlook remains unchanged at the upper end of our target range but with significantly improved resilience and reduced volatility in earnings. This additional aggregate cover, in combination with the remainder of our reinsurance program, increases the resilience of our business to natural hazards and the related uncertainties for the next five years.”

Suncorp also explained that it is continuing to progress the renewal of the remainder of its reinsurance program for FY’27, including its main catastrophe cover, which is on track to be finalised by June 30th, 2026.