“It is pleasing to see stability return to global reinsurance markets after three years of disruption,” Johnston said.
He noted that reinsurance is a significant input cost for insurance products, and along with broader inflation, has driven up insurance premiums for customers in Australia and New Zealand.
“With the completion of the Bank sale scheduled for July 31, and the reinsurance program successfully renewed, we will now be in a position to consider other reinsurance covers that may be appropriate,” Johnston said.
The FY25 reinsurance program maintains a maximum event retention of $350 million for a first large event and $250 million for a second large event. The main catastrophe program covers home, motor, and commercial property portfolios across Australia and New Zealand, providing protection for losses between $350 million and $6.75 billion, which includes one full prepaid reinstatement. This limit exceeds the regulatory requirements for Australia and New Zealand.
Similar to the previous year, group dropdown covers have been purchased to reduce the second, third, and fourth event retention to $250 million. The Australian dropdown program continues to reduce retention for a third and fourth event in Australia to $150 million.
After a comprehensive review and the implementation of the federal government’s Cyclone Reinsurance Pool (CRP), Suncorp said that it decided not to renew its quota share agreement for the Queensland home portfolio. The CRP, along with improved risk selection and pricing, has added resilience to the portfolio.
In New Zealand, 100% of the buydown cover (including a prepaid reinstatement) has been placed to provide cover between NZ$200 million and the Group’s maximum event retention.
Previously, only 52% of the buydowns were placed with an attachment point of NZ$100 million. The increase in retention reflects the impacts of early 2023 weather events on the availability and economics of reinsurance cover in New Zealand.
The cost of the FY25 catastrophe reinsurance program is expected to be broadly in line with FY24, considering changes to the program structure, including the removal of the Queensland quota share and increased exposure from portfolio growth, offset by improved market conditions.
The natural hazard allowance for FY25 is expected to increase to $1.565 billion from $1.36 billion in FY24, due to unit growth, inflationary pressures, and increased risk retention from the program structure changes. The final FY25 natural hazard allowance will be updated with the full year results on Aug. 19, 2024.
Suncorp also said that it continues to incorporate input costs, including reinsurance program costs and the natural hazards allowance, into the pricing of its insurance policies to maintain its underlying insurance margin within a 10% to 12% range. The FY25 reinsurance program changes do not have a material impact on the group’s target capital.
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