Australia’s largest catastrophe insurers have purchased additional covers in recent years, protecting them against the increased frequency of large weather-related events, according to Fitch Ratings.
Suncorp-Metway and IAG hold around 60 per cent of the Australian personal lines market, with Suncorp likely to incur greater losses given the group’s $200 million retention on its main catastrophe program versus IAG’s $135 million should the gross loss breach individual retentions, Fitch said.
“The first few months of 2010 have seen a return of large weather-related losses in Australia,” said John Birch, associate director in Fitch’s financial institutions group.
“Although still to be quantified, initial claims numbers would indicate that insured losses from the weekend storms in Melbourne would be significant.”
Both group’s main catastrophe programs include single vent retentions of $200 million. IAG has a three-year cover negotiated in 2008 that adds an additional layer, reducing the retention on a first-year event in Australia to a maximum of $135 million for this financial year.
Suncorp has increased its aggregate cover to $355 million; aggregate cover of $250 million would have resulted in the same level of net losses for the group.
Current reinsurance arrangements provide both companies with significant capital protection should further significant large loss events occur. With strong personal lines rate rises, improved investment results and positive developments in operational efficiency at both insurers, Fitch stated it does not expect this to have any negative impact on ratings.
