OPINION: The increasing frequency of natural perils is forcing reinsurers to use more of their own capital to cover losses. That may be an issue for regulators looking into the Suncorp Bank sale.
The competition regulator ought to have a close look at the 20 to 25 per cent increase in the total reinsurance expenses at Insurance Australia Group as part of itsIAG said on Monday its total reinsurance expenses for the 2023 financial year would be in the range of $790 million to $820 million, up as much as $161 million on 2022.
IAG’s chief financial officer, Michelle McPherson, said: “This was a rational economic decision balancing the interests of all our stakeholders, including minimising the impact of additional reinsurance costs on our customers.” When Suncorp got hit with higher reinsurance costs in July 2021, it pushed through home insurance premium increases of 15 per cent. IAG is expected to increase its premiums by low to mid double-digits.
He said a board and management that had a singular focus on a simpler insurance business model was better placed to invest in and manage the underwriting challenges caused by the increasing frequency and severity of natural hazards.The essence of the Suncorp Group argument is that the ACCC’s consideration of the Suncorp Bank sale has to include an analysis of a conglomerate being burdened with both rising bank capital costs and rising insurance capital costs.
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