Suncorp Group's CEO, Steve Johnston, revealed that the company had to negotiate with reinsurers to ensure continued coverage for its New Zealand policies following a series of major weather events, including Cyclone Gabrielle.
Speaking in an interview during a visit to New Zealand from Australia, Johnston acknowledged concerns that reinsurers might pull out of the New Zealand market due to the unexpected severity of recent natural disasters.
"There was a concern that they would walk away from New Zealand," Johnston said. He explained that the scale of cyclones in Auckland and the magnitude of flooding were unanticipated by reinsurers, which prompted apprehension about maintaining coverage in the region.
Despite the challenges, Suncorp successfully secured a reinsurance agreement 12 months ago, though at a higher cost.
Suncorp’s reinsurance expenses increased by 36% in the past financial year, a significant factor in rising insurance premiums across New Zealand. Johnston is now pushing for reinsurers to lower their rates, but reinsurance costs have been a major driver of increased premiums charged to customers.
According to Statistics New Zealand, insurance inflation rose by 14% in the year ending June, outpacing general consumer price inflation and making it one of the largest contributors to the Consumer Price Index (CPI). Johnston noted that the steep rise in insurance prices is uncomfortable but necessary to maintain a sustainable insurance market.
“It gives me no pleasure that insurance inflation is sitting above CPI. It’s uncomfortable. But it’s necessary in terms of having a sustainable insurance market going forward,” he said.
Suncorp's premiums in New Zealand increased by an average of 17%, with consumer policy prices seeing a 23% rise. These price hikes are among the largest across the company’s portfolio.
Suncorp, along with other general insurers such as IAG, NIB, and Tower, has reported improved profitability in recent periods, following financial impacts from Cyclone Gabrielle and the Auckland floods.
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