Auckland flood storm might have been a one-in-250-year event, Suncorp says

Wednesday, 8 February 2023

Many households are still picking up the pieces.

Australian insurer Suncorp, which owns the Vero and AA Insurance brands, has told investors it has now had more than 8000 claims from floods in Auckland and the North Island.

Added to the 15,000 claims received by IAG, which owns the State, NZI and AMI brands, and the 1900 claims received by Tower, the number of claims made to the largest three house, contents and car insurers is now around 26,000.

“There are indications that this was a 1-in-250-year event with some areas of Auckland getting more than 280mm of rain in 24 hours,” said Jimmy Higgins, Suncorp New Zealand chief executive.

After reinsurance recoveries, Suncorp expected the flood claims to cost it $50 million.

* More than 13,600 flood claims now lodged with insurers

Tia Toarea-Katia has lost everything in flood, and is now living with 15 others in a three-bedroom home.

* Bigger claims drag down insurer IAG's New Zealand profit

Suncorp’s claims figures were released with the insurer’s six-monthly report to shareholders on the Australian ASX sharemarket.

It said its New Zealand operations recorded an after-tax profit of $91m for first six months of its financial year, which ends in June.

That profit for the last six months of 2022 was up 8.3% on the same period the year before, and was driven by increases in premiums charged to households and businesses.

Suncorp Group chief executive Steve Johnston said the strong result came despite ongoing inflationary pressures and the impacts of eight natural hazard events, which resulted in 53,000 claims in Australia and New Zealand.

“Our Australian and New Zealand businesses have achieved strong growth in premiums,” he said.

Suncorp businesses in New Zealand collected premiums of $1.2 billion in the first half of its financial year, up 12.2% on the same period the year before.

The last few years have seen the cost of house, contents and car insurance rise rapidly at both Suncorp, and its main rivals IAG and Tower, which is being felt by policyholders whose insurance comes up for renewal.

On February 3, IAG chief executive Nick Hawkins said: “Premium rates continue to increase in response to claims inflation and in anticipation of additional reinsurance and natural perils costs.”

IAG is forecasting a lift in insurance profits in the second half of the year, partly as a result of higher premiums charged to policyholders in Australia and New Zealand.

Despite increases in the cost of insurance, few households were ditching their cover, though Hawkins acknowledged in a briefing to investment analysts that affordability was a rising concerns for a subset of households.

But, he said: “Our retention rates have remained at very high levels, reflecting the value of insurance to our customers.”

Suncorp has now settled more than 1000 claims related to the Auckland flooding, and paid out over $5m, said Higgins.

He hinted that global reinsurers, which insure insurers like Suncorp against the risk that large events are too big for them to handle, could increase the amount they charged New Zealand insurers.

“The significance of this event has reached the corridors of global reinsurers who have supported New Zealand insurance markets over the years, and events such as these will cause risk models to be updated,” he said.

“However, our focus right now is helping our customers to assess, recover and move on from the events of the Auckland Anniversary weekend weather.”.