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Highlights:
- NSW floods receive ‘significant event’ status from ICA, insurers to align with claims.
- Suncorp Group has already declared a spike in claims. Shares posted losses on Tuesday.
- Peers IAG and QBE followed the same trend, despite previously reported business growth.
Storms and flooding have battered regions of New South Wales and the situation is now recognised as a ‘significant event’ by The Insurance Council of Australia (ICA). This means that affected people will not only be able to claim for losses but will even get assistance from ICA. Insurers have also recognised it as a distressing time for policyholders already suffering from the February floods. However, it seems that insurers will have to battle with the increasing claims now.
While the scenario is still developing, let us look at how the current NSW flood is affecting stocks of insurers Suncorp Group Limited (ASX:SUN), Insurance Australia Group Limited (ASX:IAG) and QBE Insurance Group Limited (ASX:QBE). Notably, these stocks are also the largest listed insurance companies on ASX, in terms of market cap.
Suncorp Group Limited (ASX:SUN)
Insurer, Suncorp Group Limited, has flagged an expected spike in its claims volume. The company highlighted in its latest ASX announcement that natural hazard claims last FY had cost it almost AU$1.1 billion. While it was in line with expectations, in the current year, Suncorp has raised its natural hazard allowance to AU$1.16 billion. This is likely to spike up the reinsurance costs for the company. Suncorp believes that if FY23 experiences similar weather events like FY22, it would produce a net loss of around AU$200 million more on a pcp basis.
Meanwhile, floods have engulfed NSW again and SUN share price dipped 1.91% on Tuesday.
Insurance Australia Group Limited (ASX:IAG)
Another insurer, tackling thousands of insurance claims already, is Insurance Australia Group Limited.
IAG, back in March, received 6,700 claims from flood affected people in NSW and Queensland. Before that, the company had reported its H1-22 financials and shown underlying margin growth against Covid-19. However, in its recent ASX release about sale of Malaysian business, IAG is expecting a net loss after tax of approximately AU$90 to be recognised in IAG’s FY21 results. It appears that investors are seeing further charges from the claims that might arise from the recent NSW flood. As a result, IAG share price lost 1.39% on Tuesday, when ICA termed the NSW flood as a significant event.
QBE Insurance Group Limited (ASX:QBE)
Share price of QBE Insurance Group Limited also edged down on Tuesday, moving 0.34% lower. This was despite the company reporting strong premium growth in its Q1-22 update released in May. QBE Insurance even reported a group-wide renewal rate hike of 7.9% in Q1-22. While natural catastrophe claims for the quarter were in line with its allowance, QBE expected exposure from the Russia/Ukraine war. There was no mention about February’s NSW floods however, the share price seems to be following its peers as of date.
