In­surance un­cer­tain

Townsville Bulletin - - Investor -

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.

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