Australian insurer Suncorp has secured an additional five years of total reinsurance cover, which will provide A$800 million in annual cover and up to A$2.4 billion in total cover for the period commencing June 30, 2026.
The top-up point for total cover is linked to the growth of Suncorp’s exposure over time and is set at $1.85 billion in financial year 2027.
This means the add-on point is $50 million above the projected Natural Hazard Allowance (NHA) of $1.8 billion in FY27, excluding claims handling charges (CHE) and profit commissions.
Including CHE and profit commissions, NHA is expected to be A$1.85 billion in FY27 compared with A$1.77 billion in FY26.
The insurer explains that it expects total coverage to effectively limit natural disaster costs at the point of attachment in approximately 90% of cases in any given year.
In addition, the FY27 agreement also includes protection provided by Suncorp’s existing pull-down arrangements of less than A$350 million previously provided. The agreement is expected to reduce overall volatility in net claims costs and free up approximately $100 million in one-time capital through a modest reduction in capital targets.
In an update, the insurer said it now expects natural catastrophe experience in FY26 to be approximately $250 million higher than FY26 allowances, a direct result of a $453 million increase in H1’26 allowances over FY26, assuming there are no further significant events.
For reference, Suncorp has secured core catastrophe cover covering losses of A$500 million to A$6.3 billion in its 2026 reinsurance renewals, while also arranging a structured multi-year settlement to reduce first and second event retention to A$350 million.
Suncorp acting chief executive Jeremy Robson explained the cover was a “vital component” of the insurer’s reinsurance programme.
This is also a direct result of the tougher reinsurance market over the past few years, which provides an opportunity to enhance the resilience of Suncorp’s natural catastrophe reserves.
Robson added: “To further optimize economics, the attachment point for the new cladding is slightly above the natural hazard allowance. Improving market conditions now make total cladding a viable part of the overall scheme.”
The economic cost of insurance is expected to be roughly neutral relative to the modeled expected recovery rates and profit-sharing commissions. The underlying ITR margin outlook is expected to remain unchanged at the upper end of the 10-12% range.
Suncorp explained that it is continuing to progress the renewal of the remainder of its reinsurance program for the 2027 financial year, including its primary catastrophe insurance, which is expected to be completed by June 30, 2026.
Robson said: “This new reinsurance arrangement strengthens the sustainability of our commitment to customers and optimizes 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 earnings volatility. This additional total coverage, combined with the remainder of our reinsurance program, improves the ability of our business to respond to natural catastrophes and related uncertainties over the next five years.”
Finally, Suncorp expects GWP growth of approximately 3% in FY26, driven primarily by continued weakness in the New Zealand dollar, which is expected to lead to growth of approximately 0.41 percentage points in AUD terms, as well as improved changes in the domestic risk mix.
