Given it has been rather wet up here in QLD and northern NSW in this note we assess the anticipated impact on insurance companies. Items to note:
- The Insurance Council of Australia says almost 5000 claims worth $43m have been filed since Saturday. It is expected that insurance losses will rise into the hundreds of millions of dollars in coming weeks as floods start to peak across Queensland and New South Wales
- This is in comparison to the January 2011 floods which cost close to $2.4 billion
- Suncorp Group/Vero (probably the most exposed) has plenty of financial headroom before flood payouts start to crimp earnings. Suncorp Group’s allowance for large natural hazards for FY13 is $520m. It has so far used just a fraction of this with natural hazard claims over the six months to end December totalling only $147m
- Overall, insurance companies have a good capacity to absorb losses this year given the first half was quite a benign period for losses
- Insurers also have comprehensive reinsurance programs to limit the financial impact of natural hazard events
- Insurance companies have also stated the latest losses are unlikely to trigger premium increases
- Therefore while not positive, it is certainly not a financially significant issue for insurers, more a business as usual event
- It is also expected to be an insignificant event for global reinsurers (such as Swiss Re)