Suncorp’s (ASX: SUN) latest ASX announcement says the recent floods across the eastern seaboard will cost up to $250,000, with over 7,600 claims received with more expected, as the clean up continues. These preliminary assessments were facilitated by state governments classifying assessors and tradesmen as essential workers for the purpose of travel there.
Out of these 7,600 claims, approximately three quarters are from NSW, 20 percent from south east Queensland, and the rest from Victoria and the ACT.
The wild weather which lasted a fortnight particularly devastated the flood prone regions of Western Sydney and the Mid-North Coast of NSW. These preliminary assessments came with a warning from Suncorp Group CEO Steve Johnson for the need to address flood proofing homes and not building in flood prone areas.
As a country, we need to address how we can protect homes in flood-prone regions through government investment in mitigation infrastructure. We must also improve planning decisions to ensure we are not building new homes in high-risk areas, Mr Johnston said.
Given the recent attention given to these floods, this announcement would come with minimal surprise to the market, and skill keeps Suncorp within its budget allowance for natural disasters for the year, with the full limits remaining on the Group’s main catastrophe program and reinsurance covers. This is because its claim costs from this recent flooding event is capped at $250 million to protect itself from exposure to larger disasters, so with an estimated cost of equal or less than that Suncorp won’t have to tap into its reinsurance cover.
If more extreme weather events occur this year will leave Suncorp facing some level of risk. However, ratings group Fitch is quite confident with Suncorp and has raised its outlook on expectations that they will be able to manage the claims from both the flooding and pandemic induced business losses. This is mainly due to its strong reinsurance program which protects the Group and well as strong capital buffers, with Fitch’s long term issuer default rating for Suncorp upgraded from negative to stable.
Since the beginning of the heavy raining on 16th March, SUN has fallen 6.7%, but has risen 0.61% from the open today, and has continued a small rise throughout the day.
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
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