Suncorp New Zealand's Chief Executive says the country’s natural hazard risks are waning the appetite of global reinsurers, and NZ will need to show it has a stronger national strategy around climate adaptation if reinsurance appetite is to return.
The insurance group released its annual results on Monday, revealing Suncorp NZ paid out $1.2 billion in claims during the 2024 financial year with approximately $600 million of that going towards property losses, and $400 million in vehicle related claims.
Suncorp NZ CEO Jimmy Higgins told interest.co.nz reinsurers still have an appetite for NZ, but it has changed to a much more reserved one.
This is due to reinsurers being “surprised” by the Auckland Anniversary floods and Cyclone Gabrielle events last year, and since then reinsurers have wanted insurers to take on more risk instead.
“They never expected the losses from a flood in Auckland. It was never in their models and they never expected a cyclone of the level that we saw in the Hawke's Bay region,” Higgins said.
“The reinsurance appetite for NZ has permanently shifted to much higher deductibles. And so we have to look at alternative ways to provide that cover for us because we have an appetite for a much, much lower deductible.”
In September last year, the Insurance Council of New Zealand (ICNZ) said insurers had paid out 64% of claims or $2 billion from the Auckland floods and Cyclone Gabrielle.
As of July this year, 96% or $3.8 billion of all private insurance claims had been settled, according to the ICNZ.
In 2023, the Treasury priced the total cost of repairs from the Auckland Anniversary Weekend floods and Cyclone Gabrielle at between $9 billion and $14.5 billion.
The Suncorp group’s natural hazard allowance for the 2024 financial year was $1.36 billion, and the total cost of natural hazard events in the period came in $125 million below the group’s allowance.
Suncorp’s total reinsurance programme for the whole group during the 2025 financial year is $1.56 billion.
Higgins said insurers needed to be able to show reinsurers that they had an understanding about natural hazard risk going forward – and NZ is doing something about it.
Suncorp has found from climate modeling and scenarios that the average annual loss as it relates to surface flooding will increase by 20% by 2030 and 50% by 2050.
“What that means is that we’re going to see more extreme but short duration rainfall in the years ahead,” Higgins said.
“So like another Auckland, for example, is what we'll see. And so we need to be ready for that.”
For Higgins, this means NZ has to answer questions like if the country’s infrastructure is set up to deal with the next major event, if storm systems are designed appropriately, and if systems in place have the capacity to deal with large levels of rainfall.
“Is the maintenance of that infrastructure appropriate? Are we clearing gutters, stormwater systems? How are we dealing with those areas that we know are more exposed to surface flooding?” he said.
Earlier this year at Suncorp NZ’s half-year results, Higgins told interest.co.nz that there needed to be more “central coordination” around climate adaptation.
Higgins’ wish came true in May when Climate Change Minister Simon Watts gave the Finance and Expenditure Committee the responsibility of determining how NZ manages the risks and expenses associated with future extreme weather events.
The inquiry plans to provide recommendations and principles for a climate adaptation framework and report back to Watts on September 5th.
Higgins is an advisor on the independent reference group set up by the Ministry for the Environment (MfE) to support development of policy advice in regards to the climate framework.
This means he was unable to comment in detail but said he was encouraged by the cross-party support towards the inquiry so far and the purpose was “well understood and well supported”.
“There’s no one arguing with it,” he added.
Following the climate inquiry, Higgins said it needed to be communicated to the global reinsurance market that NZ had an understanding of natural hazard risks and was working on reducing them.
“That helps the reinsurers say, well, these guys know what they’re doing and they’re protecting the country and therefore, you know, they've got their [risk] appetites improving,” he said.
Suncorp NZ’s financial results on Monday showed Gross Written Premiums (GWP) in the 2024 financial year rose 17.3% to $2.8 billion. In 2023, Suncorp NZ’s annual GWP was up 14.3% to $2.4 billion.
The firm also reported a net profit after tax of $230 million in the 12 months period which is double what it reported in its full 2023 financial results.
Suncorp is the second largest insurer in NZ and Australia and holds more than a quarter of Australia's general insurance market.
In NZ, the insurer covers approximately 850,000 households and $590 billion of assets through the Vero Insurance brand and the joint venture AA Insurance business in NZ. It used to also own Asteron Life but announced the sale of the life insurer earlier this year.
2 Comments
“They never expected the losses from a flood in Auckland. It was never in their models and they never expected a cyclone of the level that we saw in the Hawke's Bay region,” Higgins said.
Clearly they need to hire some brighter people and get some new models then.
Funny, I'd cut the same sentence, to paste with the same comment.
This weather escalation has been well signaled, for a long long time.
Specific sites might be a little too much, but the top half of the NI - easy. They will break records, both in intensity and frequency.
Not so much brighter people - just physics-savvy. You could pull off the needed correlation idling, on 100 IQ; probably less.
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