Australian insurer Suncorp Group says since September it has received 2600 bushfire-related claims worth up to $AU345 million ($NX357.9m), of which nearly a third was recorded in the first few days of the month.
The remains of burnt out buildings along main street in the New South Wales town of Cobargo on 31 December 31 2019. Photo: AFP
Suncorp on Thursday joined its larger rival Insurance Australia Group which flagged costs of $AU280m ($NZ290m) last week related to the bushfires, which have scorched huge swathes of land killing 26 people and killing or injuring an estimated one billion animals, including livestock.
Although wildfires in summers are not uncommon, the current bushfire season started earlier than normal following a three-year drought that has left much of the country's bushland vulnerable to such calamity.
As the intensity of the fires peaked last week, Suncorp said it received claims worth as much as $AU105 million in the first five days of January, taking the total in the first half of fiscal 2020 to $AU519 million, surpassing its allowance for the period by $AU109 million.
Market participants, however, see a limited impact of the losses on the company's bottom line due to an elaborate web of reinsurance programs.
"Suncorp has a strong reinsurance program in place for the second half of the financial year so there is a low probability of our natural hazard allowance of $820 million being exceeded for FY20," the company spokesperson told Reuters.
Reinsurance occurs when multiple insurance companies share risk by purchasing insurance policies from other insurers to limit their own total loss in case of a disaster.
Shares of Suncorp, which is scheduled to report its first-half results on 11 February. slightly extended their gains on the news before closing 1.3 percent higher at $AU13.19 on Thursday.
"Suncorp has displayed fiscal discipline in its reinsurance along with the way it has priced its premiums, and shareholders have taken heart from that," said James McGlew, executive director of corporate stockbroking at Argonaut.
"There are no red flags as Suncorp's balance sheet is okay and they will be able to pay their clients in a timely fashion ... If it [bushfires] was to go on for another six to eight weeks, that will then start to put pressure on the insurers."
Australia's weather agency forecasted no significant rainfall or signs of cooler weather in the next few months and said that only a large downpour would halt bushfires sweeping across the country.
The Brisbane-based company, which took a $AU178 million hit from a Sydney hailstorm last year, had increased its natural hazard allowance to $AU820 million for the financial year 2020, from $AU720 million and bought another $AU200 million of natural perils reinsurance cover.
- Reuters