NZ floods: Suncorp warns on reinsurance, IAG on catastrophe budget erosion
Australian insurance giants Suncorp and IAG have both warned of impending losses from the severe flooding that has affected the Auckland area of New Zealand in recent days, with the pair highlighting their reinsurance arrangements and the potential for claims from the event to be significant.
Auckland was said to have received 75% of its typical summer rainfall in just 15 hours last week, driving severe flash flooding and widespread damage to properties and vehicles.
New Zealand’s prime minister Chris Hipkins told the media that there has been significant damage and impacts across the Auckland area, as well as further afield on the North Island of New Zealand.
“It’s a 1-in-100-year weather event, and we seem to be getting a lot of them at the moment. I think people can see that there’s a message in that,” Hipkins said.
Adding that, “Climate change is real, it’s with us.”
Now, there are concerns over additional heavy rainfall this week, with a subtropical low forecast to approach the North Island and severe weather expected.
The MetService of New Zealand warns it has a, “high confidence that rainfall accumulations will exceed warning criteria about Northland and Auckland in the early hours of Wednesday,” while severe gale force winds are also anticipated.
The city of Auckland is readying itself for more potential flooding as a result, given the torrential downpours of last week have left ground-water levels high.
Australian insurer Suncorp said it has already received 3,000 claims across its Vero and AA Insurance brands, with that number expected to increase as policyholders return to their homes and commercial claims are filed via brokers.
Suncorp Group CEO, Steve Johnston said the full extent of the damage from the flooding will take some time to assess, while the insurer is aware more rain is forecast and that damage extends beyond Auckland.
Suncorp appears to anticipate that its reinsurance program will respond to the New Zealand flooding.
The company said that its comprehensive reinsurance covers losses in the country, meaning this flood event loss will be capped at NZ$50 million, net of reinsurance cover.
Meanwhile, IAG, another significant Australian insurance group, said that it has received more than 5,000 claims across its AMI State and NZI brands.
IAG also expects claims from this first flood event in Auckland will continue to rise, as the event continues to unfold and claims continue to be filed.
IAG said that, while it’s too early to estimate the financial impact of these New Zealand floods, the company could review its estimate for FY23 natural peril costs, implying it could need to adjust and raise its catastrophe budget.
IAG also cited its extensive reinsurance arrangements, saying that thanks to its quota share and other reinsurance programs, the insurers’ maximum retention from an event like these floods is $236 million.
