Australian primary insurance giant Suncorp has said that completion of its catastrophe reinsurance renewal by July 1 remains on track, but highlighted that placing its aggregate reinsurance coverage could be more of a challenge to place.
Suncorp’s losses from natural catastrophes and severe weather over the last year had already eroded a significant amount of its reinsurance protection in recent months, with the insurer having revealed back in February that around half of its aggregate reinsurance protection had been eroded by heavy losses from bush fires, hail and storms.
The insurer went above budget in terms of catastrophe losses, despite having increased that budget and purchased more reinsurance last year, so it’s no surprise that further work to strengthen its reinsurance program had also been taken for the current period.
Now, Suncorp is back in the market to renew its core catastrophe arrangements that incept at the mid-year renewals and while it does expect to remain within budget for the full calendar year, the fact it has made recoveries in recent months may make its renewal more costly it seems.
Suncorp Group CEO Steve Johnston explained this morning that the insurers renewal placement is well underway.
“In terms of our reinsurance renewal, the market is open and continues to function efficiently. We are well advanced with the placement of our main cat program and we are currently in negotiations for the remainder of the program including the aggregate covers and quota shares,” Johnston explained.
However, he doesn’t expect the renewal placement to come without its challenges, especially given the recent loss experience of Suncorp and the global reinsurance market conditions at this time.
Johnston said, “Recent experience would suggest the aggregate covers will be the most challenging part of the program. We are considering a range of potential structures for these covers.
“Nevertheless, we remain on track to complete the placement by 30 June.”
In a Q/A session with journalists this morning, the Suncorp CEO noted the importance that all its aggregate, stop-loss and top and drop reinsurance protections work together well, to provide more holistic protection to the insurer.
“We’ll look to structuring that part of the renewal to get the best outcome for us and we may well be seeking to trade off various elements of that as we work our way through to get broadly the same amount of protection we had this year, give or take some of the natural movements that will occur in sums insured in the portfolio,” Johnston said.