Suncorp Group Ltd has agreed a five-year aggregate reinsurance arrangement that will sit above its natural hazard allowance from FY27, while keeping its underlying margin guidance unchanged. The cover, effective from June 30, 2026, will provide up to $800 million of protection in each year of the contract, with a total limit of $2.4 billion over five years. It forms part of the group’s wider catastrophe and aggregate protections for its general insurance operations in Australia and New Zealand.
Acting chief executive Jeremy Robson said the new layer follows a period of adjustment in the reinsurance market. “Over the past few years, in the harder reinsurance market cycle, we have taken the opportunity to add resilience to our natural hazard allowance. In order to further optimise the economics, the attachment point for the new cover is slightly above the natural hazard allowance. The improvement in market conditions have now made the aggregate cover a viable part of the overall program,” Robson said. He said the new arrangement is intended to address both earnings variability and capital settings. “This new reinsurance arrangement reinforces the sustainability of our commitment to our customers, as well as optimising long-term shareholder value,” he said.
For FY27, Suncorp has set the aggregate cover attachment point at $1,850 million. The attachment will be indexed over time to reflect changes in the group’s exposure. The $1,850 million level is $50 million above the expected FY27 natural hazard allowance of $1,800 million, excluding claims handling expenses and profit commission. On an inclusive basis, Suncorp expects the FY27 natural hazard allowance, including those items, to be $1,850 million, up from $1,770 million in FY26. Suncorp said the new structure is modelled to limit natural hazard costs at the attachment point in about 90% of scenarios in any given year. The agreement also brings into the same structure protection that was previously provided through dropdown cover attaching below $350 million.
The group expects the lower variability in net claims costs to allow a small reduction in its internal capital target, resulting in an estimated one-off capital release of about $100 million. On its modelling, Suncorp said the economic impact of the cover is expected to be broadly neutral once premiums, expected recoveries and profit share commissions are considered. The outlook for the underlying insurance trading result margin remains at the upper end of the 10% to 12% target range.
Robson said the additional protection is aimed at reducing the effect of natural hazards on future earnings. “The underlying margin outlook remains unchanged at the upper end of our target range but with significantly improved resilience and reduced volatility in earnings. This additional aggregate cover, in combination with the remainder of our reinsurance program, increases the resilience of our business to natural hazards and the related uncertainties for the next five years,” he said. Suncorp is continuing work on the remainder of its FY27 reinsurance program, including the main catastrophe treaty, with completion planned by June 30, 2026.
Alongside the reinsurance announcement, Suncorp updated its expectations for FY26. The group continues to forecast its underlying insurance trading result margin for FY26 towards the upper end of the 10% to 12% range. Natural hazard costs for FY26 are now expected to be about $250 million above the FY26 allowance, assuming there are no further material events in the remainder of the financial year. In the first half of FY26, hazard experience was $453 million above the allowance, indicating the scale of weather-related impacts during the period.
Gross written premium growth for FY26 is now forecast at around 3%. Suncorp said the effect of translating New Zealand premiums into Australian dollars, given the weaker New Zealand dollar, is expected to reduce reported growth by roughly 0.4 to 1 percentage points. Changes in risk mix in the home insurance book have also weighed on premium growth. The group said there are no other changes to the FY26 outlook previously provided.
In a separate step, Suncorp Group Limited has set up a Wholesale Note Issuance Programme covering the issue of Wholesale Additional Tier 1 Capital Notes and Wholesale Tier 2 Subordinated Notes. The program provides a framework under which Suncorp can issue wholesale capital instruments from time to time to institutional investors. The notes are intended to be used to meet funding needs and regulatory capital requirements across the group. The developments show Suncorp adjusting its use of aggregate reinsurance and wholesale capital markets in response to natural hazard experience, currency movements, and prudential capital demands, while holding its stated margin targets for FY26 and FY27.
