Suncorp shields up as natural hazards bite $250 million over allowance

About Suncorp Group Limited

Suncorp Group Limited (ASX: SUN) is one of Australia’s largest financial services companies, offering insurance, banking and wealth products to more than nine million customers across Australia and New Zealand. Headquartered in Brisbane, Queensland, Suncorp operates a portfolio of well-known insurance brands including AAMI, GIO, Apia, Shannons, Bingle, Vero and Resilium, alongside the Suncorp Bank which was divested to ANZ Banking Group in 2024, allowing the group to sharpen its focus on its core insurance operations. Suncorp is listed on the Australian Securities Exchange and is a constituent of the S&P/ASX 50 index. The group’s insurance operations span home, motor and commercial property across Australia and New Zealand, making it one of the most significant underwriters of natural hazard risk on both sides of the Tasman.

The FY27 reinsurance program

Suncorp has successfully completed the placement of its FY27 reinsurance program, building on the five-year aggregate reinsurance arrangement announced in April 2026 that commenced on 30 June 2026. The aggregate cover provides $800 million of annual protection, up to $2.4 billion in total over the five-year period, with the FY27 attachment point set at $1,850 million. The aggregate cover is expected to cap natural hazard costs at $1,850 million for FY27 in approximately 90 per cent of scenarios, providing meaningful earnings certainty for shareholders.

The main catastrophe program covers the Home, Motor and Commercial property portfolios across Australia and New Zealand, providing protection for losses between $500 million and $6.4 billion and includes one full prepaid reinstatement. Maximum event retention is maintained at $350 million for a first and second large event, consistent with prior years. The structured multi-year reinsurance arrangement announced in July 2025 remains in place, providing protection for losses between $350 million and $500 million for the first and second large events.

For a third and fourth event, group dropdown covers for losses between $350 million and $500 million have been purchased, and combined with the dropdown cover within the aggregate reinsurance arrangement, the retention for a third and fourth Australian event is reduced to $150 million. Buydown cover in New Zealand also remains in place through the aggregate reinsurance cover, providing protection between NZ$200 million and the group’s maximum event retention.

Acting chief executive Jeremy Robson described the renewal as reflecting continued discipline in the group’s reinsurance strategy, maintaining an appropriate balance between cost, earnings volatility and capital efficiency, and noted that improved market conditions were reflected in the pricing of the main catastrophe program.

FY26 outlook

Suncorp’s FY26 result has been materially affected by an exceptionally active natural hazard period. Estimated total natural hazard costs for FY26 are approximately $2,020 million, comprising approximately $1,215 million from 18 discrete events above $10 million and a further approximately $805 million from attritional and complex hazard events. This compares to a FY26 natural hazard allowance of $1,770 million, leaving an estimated overage of approximately $250 million.

The eighteen discrete events included the South-East Queensland Hail event in November 2025 at an estimated net cost of $350 million, Eastern States Severe Thunderstorms in October 2025 at $234 million, South-East Queensland Spring Storms and Hail in November 2025 at $135 million, Victorian Bushfires in January 2026 at approximately $70 million and Fraser Coast Hail in October 2025 at $56 million, among others. Southern and Western States Winter Storms in June 2026 added a further approximately $50 million to close out the financial year.

Despite the heavy natural hazard burden, Suncorp reaffirmed that its underlying insurance trading ratio for FY26 is expected to be towards the upper end of the 10 to 12 per cent range. Gross written premium growth is expected to be approximately 2.7 per cent, with the result impacted by a weak New Zealand economy, a soft commercial market across the Tasman and a marginal softening in demand in Australia.

Total investment income is expected to come in between $750 million and $800 million for FY26, a significant reduction from $1,227 million in FY25, predominantly driven by rising bond yields resulting in mark-to-market losses across both insurance and shareholders’ funds. The exit yield on insurance funds as at 30 June 2026 was approximately 5.2 per cent, providing a positive forward indicator for investment income in FY27.

Conclusion

Suncorp enters FY27 better insulated against natural hazard volatility than in prior years, with the new aggregate cover expected to cap costs at $1,850 million in approximately 90 per cent of scenarios. While FY26 was a punishing year for weather events, the group’s underlying insurance trading ratio held firm and improved catastrophe program pricing provides a tailwind heading into FY27. With an insurance fund exit yield of approximately 5.2 per cent and a more layered reinsurance structure in place, Suncorp is better positioned to absorb whatever the Australian and New Zealand weather seasons deliver next.