The cost of Melbourne’s hailstorm 10 days ago is moving past half a billion dollars, with close to 70,000 claims made to three major insurers.
Insurance Australia Group with over 24,000 claims, Suncorp with more than 35,000 and Allianz with over 8,300 claims, seems to have the bulk of the insurance costs.
It’s now clear the storm, and the floods in southwestern Queensland, will make a mess of the insurance companies’ second half earnings and returns.
Higher premiums could result, especially when the companies come to redraw their re-insurance treaties for the 2010-2011 financial year.
The three are the leading general insurers in the state, The other major insurer, QBE, has not made any statement, so presumably the direct or reinsurance costs of any claims are not material.
Allianz says the storm on March 6 will likely go down as one of the five largest hail storms in Australia in more than 40 years.
"Claims continue to be received from the Melbourne storms and the event is on track to be one of the most damaging hail events in recent memory," Allianz corporate affairs general manager Nicholas Scofield said on Tuesday in a story on AAP.
"One week on, total insurance industry claims costs are heading quickly towards the half a billion dollar mark, which would make the March 2010 Melbourne event one of the largest storms in decades and the largest hail event since the massive Sydney hail storm of April 1999."
That storm is the most expensive weather event for Australian insurers in the last two decades, with $1.9 billion in claims made with around 130,000 Sydneysiders affected.
Allianz says it has so far has had more than 8,300 claims valued at around $58 million from its Melbourne policyholders.
Allianz can afford it, by some measures it is the most profitable general insurer in the country.
The company reported revenues of $A2.8 billion in 2009, Gross Written Premium increased by 10% (Allianz Australia covers Australia and New Zealand) and profit before tax increased by 60% to $A484 million.
On Monday Australia’s largest general insurer, Suncorp-Metway, put the number of its claims from the storm around 35,000, with a maximum financial exposure of $200 million, after reinsurance cover.
That $200 million is the maximum event retention (MER) under the Group’s property catastrophe reinsurance cover.
"Claims are predominantly for damage to homes and vehicles, with a smaller number of commercial claims being received," Suncorp said.
The Group has also received 1,600 claims with an estimated cost of $25 million to $30 million from recent flooding in southern Queensland.
"Under its reinsurance arrangements, Suncorp has pre-paid a reinstatement of its property catastrophe program.
"Additionally it has aggregate cover where the cost of events above $10 million is aggregated until $250 million is exceeded. The policy then provides $355 million of coverage for events where losses exceed $10 million."
Insurance Australia Group hasn’t updated the market since its statement last Friday when it said it had received in excess of 24,000 claims "following severe weather in Victoria on 6-9 March".
IAG said it now expects the related claim cost to reach its maximum event retention (MER) of $135 million under the Group’s reinsurance cover.
"As a result of this event, natural peril costs are now estimated to exceed the budgeted $184m allowance for the second half by $105 million.
"As a consequence, the Group is refining its FY10 insurance margin guidance to 10.5% – 12.0%, from 11.5% – 13.0%."
IAG Managing Director and CEO, Mr Michael Wilkins said, “We now believe the scale of this event means we will make claims on our catastrophe reinsurance covers, which will cap the Group’s total pre-tax loss at $135 million.
"The Group’s MER for any subsequent event in calendar year 2010 now reduces to $75 million.
"The higher claims will take around 2% from the company’s insurance margin, which had risen in the first half because of an absence of bad weather, unlike in preceding half years.
"While this event will take almost 2% off our reported full year margin, for FY10 we are confident we can achieve an insurance margin between 10.5% – 12.0% given the continued improvement in the underlying performance of the business," Mr Wilkins said.
IAG and Suncorp shares both rose yesterday: IAG up 3c at $3.99 and Suncorp up 6c to $8.63.
