Australia’s Suncorp slashed reinsurance in bid to mitigate hard market.

Australian insurance group Suncorp cut limit, hiked retentions and axes its aggregate excess of loss cover to mitigate a hard reinsurance market at the mid-year renewals, but will still pony up 12% more for its reinsurance coverage and have to set aside more capital.

The group's aggregate excess of loss cover was left unrenewed “following comprehensive modelling on its cost and benefits,” management said.

Limit on main catastrophe programme was cut to $6.4 billion from 6.8 billion the year prior with first event retention upped from $250 million to $350 million, albeit drop-down covers are employed to cut retentions on ensuing events for the group as a whole and in Australia.

“We continue to see a significant reassessment of risk by our reinsurance partners, which reflects elevated natural hazard activity in recent years both globally and in Australia and New Zealand,” Suncorp group CEO Steve Johnston (pictured) said.

“This, combined with broader inflationary pressures across the economy, continues to impact the cost of reinsurance across the industry.”

Suncorp’s natural hazard allowance is expected to increase by $200 million to $1.36 billion on the programme changes and impact of inflation, partly offset by the group’s mid-year accession to the federal government’s cyclone reinsurance pool.

A 30% quota share arrangement on Queensland home insurance was renewed given what Suncorp considers to be an outsize market share in the region.

Reduced reinsurance spells a draw on capital. Suncorp expects an approximately $340 million increase in required capital held.

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