Reinsurers almost exited New Zealand, Suncorp CEO reveals

The head of Suncorp Group - the transtasman insurance company that owns Vero and AA Insurance - says he had to convince reinsurers to keep providing cover for New Zealand policies after major weather events here including Cyclone Gabrielle.

“There was a concern I had that they would walk away from New Zealand,” Steve Johnston told Markets with Madison while he was visiting New Zealand from Australia.

“It was a natural reaction to something they hadn’t anticipated, and they hadn’t anticipated cyclones in Auckland or flooding events of that magnitude.”

Johnston said Suncorp managed to negotiate their reinsurance 12 months ago, convincing them to keep a commitment to covering New Zealand - although at a higher price.

A car ended up through the side of a family's home in Esk Valley, north of Napier, during Cyclone Gabrielle in 2023. Photo / Warren Buckland

Johnston was now requesting reinsurers reduce their prices. Suncorp New Zealand’s reinsurance costs rose by 36% in the past financial year.

Reinsurance was one of the reasons insurance premiums charged to customers had become more expensive in every category, even outpacing general consumer price increases.

Insurance inflation rose by 14% in the year to June, making it one of the most significant contributors to CPI, according to Statistics New Zealand.

“It gives me no pleasure that insurance inflation is sitting above CPI. It’s uncomfortable. But it’s necessary in terms of having a sustainable insurance market going forward.”

Suncorp’s premiums rose by 17% on average in New Zealand, with a 23% increase for its consumer policies - the largest price hikes across the company’s offerings.

Suncorp was one of many general insurers, including IAG, NIB and Tower, which had reported recent increases in profitability recently, after some took financial hits during Cyclone Gabrielle and the Auckland flooding events.

Watch Steve Johnston discuss the insurance giant’s margins and insurance affordability in today’s episode of Markets with Madison above.

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Madison Reidy is the host and executive producer of the NZ Herald’s investment show Markets with Madison. She joined the Herald in 2022 after working in investment, and has covered business and economics for television and radio broadcasters.