Insurers Likely To Weather Latest Storms

Sydney Morning Herald

Tuesday November 25, 2008

Danny John

THE cost of the crippling storms that have swept through Brisbane and south-east Queensland has risen to at least $220 million for the country's two largest insurers, with the final bill for the damage still mounting.

Suncorp, which is the biggest provider of domestic insurance in the hard-hit region, and Insurance Australia Group have received just over 19,000 claims between them.

The largest part of the bill - at least $150 million - will be absorbed by Suncorp and its insurance businesses, AAMI, Vero and GIO. More than 13,000 claims have been lodged with them so far but it will be some days yet before Suncorp is able to say what its total financial exposure will be.

Suncorp has seen its claims rise by 5000 since Friday, while IAG, through its NRMA Insurance and CGU offshoots, yesterday said that its tally now stands at 6000, an increase of 1000 over the weekend.

A further 2500 claims have been received by the smaller Queensland insurer RACQ, which it estimates will lead to payouts of $25 million.

The cost of the storms makes them the worst to be incurred by the two biggest domestic insurers so far in their 2008-09 financial year.

The bill is also slowly edging towards the $342 million recorded after flooding in Mackay in north Queensland in February and the $409 million bill from the severe hail damage in Sydney 17 months ago.

But the impact on the insurers' profits will be limited by the insurance cover that both major companies have taken out with re-insurers who will pick up any additional cost over the set amounts that were agreed following last year's hugely damaging weather events.

Suncorp has capped its exposure to $150 million and has put in place a budgeted storm allowance of as much as $550 million which will enable it to absorb as many as four such major climatic setbacks.

However, the company told investors yesterday in a statement to the ASX that it was too early to say what the effect would be on its previous insurance profit margin guidance of an increase of between 10 and 12 per cent.

IAG indicated that its bill of between $60 million and $70 million would be comfortably within its reinsurance cover of $118 million and that it had set aside $314 million for storm cover this year.

© 2008 Sydney Morning Herald

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