THE head of Australia’s largest insurer warns the industry may struggle to secure new reinsurance coverage due to the frequency and scale of recent natural disasters.
Since September last year, insurers have been hit with a series of natural disasters at a frequency not experienced since 1999.
Suncorp Group Ltd posted a 39 per cent fall in net profit for the six months to December 31, while Insurance Australia Group’s net profit in the same period halved from the same time a year earlier.
QBE Insurance Group yesterday posted a 17 per cent fall in full year net profit in calendar 2010, with its performance weaker in the second six months.
Reinsurance, purchased from global insurers to protect against large natural peril cl ai ms and catastrophe losses, has capped the cost of those claims to the general insurers.
But with t he scale of Queensland’s floods, and the massive devastation caused by last week’s earthq uake i n Chris t c hurch, insurers may be at risk of e x h a u s t i n g t h e i r reinsurance covers.
Suncorp chief executive Patrick Snowball last week
DISASTERS: QBE chief executive Frank O’Halloran has secured reinsurance cover until 2013 flagged a 10 per cent rise in premiums as a result of expected reinsurance costs.
I A G a l s o e x p e c t s reinsurance costs to inc r e a s e , a l t h o u g h c h i e f executive Mike Wilkins said the company had secured cover for the remain- der of calendar 2011. QBE c h i e f e x e c u t i v e F r a n k O ’ H a l l o r a n s e c u r e d reinsurance cover until 2013, but painted a grim outlook for the industry.
‘‘ So be prepared for pretty tough terms and conditions, and for pricing, and higher deductibles coming through from reinsurers,’’ he said.
‘‘ And some of them may not even want to reinsure businesses in Australia or New Zealand.’’
Each of the three chief executives have defended the industry in light of frus- tration and anger about flood insurance coverage, and criticised the lack of comprehensive flood mapping in Australia.
‘‘ We didn’t as an industry authorise those properties to be built in flood-prone areas,’’ Mr O’Halloran said.