Suncorp issues update on COVID-19 impact

Suncorp issues update on COVID-19 impact | Insurance Business Australia

Suncorp issues update on COVID-19 impact

Financial services giant Suncorp Group has outlined its approach to business interruption (BI) insurance provisioning, in a new update detailing the expected impact of the coronavirus crisis to the Brisbane-headquartered provider.

“Suncorp remains confident the intention of its BI policies is clear and that policies do not respond to pandemics,” said the insurance and banking group in its November 16 statement. “Notwithstanding, the group adopts a prudent approach to provisioning and reserves to a 90% confidence level.

“As a result, the group’s BI provisioning is sufficient to cover claims costs in 90% of possible outcomes, including in the event of an unfavourable judgement for the Insurance Council of Australia BI industry test case. This is considerably in excess of the expected outcome.”

The group, which in August reported a $913 million net profit after tax for the financial year ended June 30 (FY20), explained that it has considered the wide range of industries and geographies affected by the pandemic in assessing its BI claims exposure and corresponding provisioning.  

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Suncorp noted: “Consistent with the group’s prudent reserving policy, at the FY20 financial results a provision of $70 million (pre-tax) was recognised for potential BI claims in relation to COVID-19 up to June 30, 2020.

“The group has now assessed the potential for BI claims in relation to COVID-19 from the second Victorian lockdown, commencing on July 08, adopting a consistent prudent valuation approach to the initial provision.”

According to Suncorp, it now expects to recognise a further $125 million provision for the first half of the 2021 financial year, given the breadth and depth of the lockdown in Victoria – taking the group’s total provision for potential coronavirus-related BI claims to $195 million before tax.

“Suncorp awaits the NSW Court of Appeal’s judgement on the Insurance Council of Australia’s BI test case,” added the insurer. “The test case is considering the issue of policy wordings that refer to the Quarantine Act. Given the group’s prudent reserving approach, the industry test case outcome is not expected to affect the total BI provision.”