Suncorp’s FY27 Reinsurance Costs Rise Despite Improved Catastrophe Pricing

Five-Year Aggregate Cover Strengthens Risk Management

Suncorp (ASX:SUN) has successfully placed its FY27 reinsurance program, anchored by a multi-year aggregate reinsurance arrangement providing $800 million of protection annually, up to $2.4 billion over five years. This aggregate cover, commencing 30 June 2026, features an attachment point of $1.85 billion for FY27 and is designed to enhance resilience and reduce earnings volatility.

Acting CEO Jeremy Robson emphasised the Group’s continued discipline in balancing cost, earnings stability, and capital efficiency. The FY27 program maintains a maximum event retention of $350 million for the first and second large catastrophe events and includes protection layers covering losses from $500 million up to $6.4 billion for key portfolios across Australia and New Zealand.

Rising Reinsurance Costs Offset by Market Improvements

Despite improved pricing conditions in the main catastrophe program, total reinsurance expenses for FY27 are expected to rise compared to FY26. The increase primarily reflects the inclusion of the aggregate cover and growth in exposure. Suncorp anticipates that the aggregate cover will allow a reduction in excess capital traditionally held above its target range midpoint, with further details to come at the FY26 results announcement.

FY26 Natural Hazard Costs Exceed Allowance by $250 Million

Natural hazard claims in FY26 have been notably elevated, with estimated costs around $2.02 billion, approximately $250 million above the Group’s natural hazard allowance of $1.77 billion. The period saw 18 separate events exceeding $10 million in net costs, including severe thunderstorms, hailstorms, bushfires, and floods across Eastern Australia and New Zealand.

These elevated natural hazard costs come on top of a soft commercial market in New Zealand and marginally reduced demand in Australia, factors that have tempered gross written premium growth to an expected 2.7% for FY26. Meanwhile, the underlying insurance trading ratio is reaffirmed near the upper end of the 10-12% target range, reflecting resilient underwriting performance amid challenging conditions.

Investment Income Slips on Rising Bond Yields

Suncorp projects total investment income for FY26 between $750 million and $800 million, down significantly from $1.23 billion in FY25. This decline is mainly attributed to rising bond yields causing mark-to-market losses on both insurance and shareholders’ funds. The exit yield on insurance funds as of 30 June was approximately 5.2%, suggesting a more favourable income outlook going forward despite near-term headwinds.

CEO Steve Johnston Returns from Medical Leave

In leadership news, Steve Johnston will resume his role as CEO effective 6 July 2026, ending the period of acting leadership under Jeremy Robson, who will return to his CFO duties. Neil Wesley will also revert from Acting CFO to his substantive role. This transition provides clarity ahead of Suncorp’s FY26 results briefing scheduled for 12 August 2026.