Australia and New Zealand insurer Suncorp Group has continued to suffer from additional over cap claims and loss creep from the Canterbury, NZ earthquakes, reporting an increase to its ultimate net loss for the events of $129 million.
Suncorp has been burning through its reinsurance provisions over the last year, with around $1.1 billion recovered from its reinsurers due to loss events in New Zealand, largely the Kaikoura earthquake, and Australian reinsurance and recoveries income of around $1.8 billion during the financial year.
The company burnt completely through its New Zealand reinsurance provisions during the year, but even after that buffer was eroded the insurer is still suffering due to the 2010/11 Canterbury quakes as well.
Once again the increase is due to over-cap claims from the Earthquake Commission, where claims are over $100,000. These larger, typically more complex claims have been a major cause of loss creep for insurers exposed to the Canterbury quakes and reinsurance capital has ultimately been the source of capacity that bears the majority of the rising claims cost.
Suncorp did note this morning that it does feel that the rate of over-cap claim loss creep is slowing down, but the insurer has not yet reflected that in its reserving as it feels it is too early to confirm the trend.
The increase in the ultimate net loss, of $129 million, has again been offset by the reinsurance provisions over the last year, with Suncorp explaining that, “The profit and loss impact associated with this increase was limited to a
loss of $13 million due to the Group’s reinsurance arrangements.”
Payments from the more recent Kaikoura earthquake have not developed, as the insurer said they have now “reached th
e fully reinsured layers.”
In the last financial year Suncorp as a group has overshot its natural catastrophe allowance by $55 million, after reinsurance, reporting $655 million of total net natural catastrophe costs across the year.
The insurers robust reinsurance program, which includes the more recently added natural catastrophe aggregate arrangements, continue to receive a lot of activity, suggesting the likelihood of rates if not firming then at least levelling out for Australia and New Zealand programs, given the above budget nature of losses is likely to extend across other major players in the region as well.