Australian insurer Suncorp has completed its 2026 reinsurance renewal, securing main catastrophe cover for losses between $500 million and $6.3 billion, and has added a structured, multi-year solution that reduces exposure to $350 million for a first and second event, with the cost of the programme expected to come down year-on-year.

The insurer has disclosed that the total cost of its fiscal year 2026 catastrophe reinsurance programme is expected to be lower than in FY’25, driven by strong reinsurance rate reductions and changes to the programme, partially offset by exposure growth in the portfolio.

The changes to the programme, outlined below, have no material impact on risk retention or capital targets, explained Suncorp.

For FY’26, Suncorp’s maximum event retention will be $350 million for a first and second large event, in line with the first event retention in FY’25. The main catastrophe programme covers the Home, Motor and Commercial property portfolios across Australia and New Zealand.

One of the changes for the year ahead is that the 2026 programme, which includes one full prepaid reinstatement, protects losses between $500 million and $6.3 billion, reflecting a $450 million reduction at the top of tower from FY’25’s cover of $6.75 billion.

Another notable difference with this year’s programme is that the group cover that reduced exposure to $350 million for first and second event for 2025, has been replaced with a structured, multi-year solution. This solution will include a profit-sharing mechanism, and reinsurer losses will be capped at $600 million over a three-year term.

“The cost of the cover is lower than in FY25 with further expected upside from the profit-sharing arrangement,” explained Suncorp.

Additionally, there have been some minor changes in the programme structure to optimise coverage under current market conditions. The second reinstatement of the $500 million to $1 billion main catastrophe programme has been added to provide further protection to the programme while reducing the risk of expensive reinstatement costs in the event of one or more large events.

Further, the group dropdown limiting a second event to $250 million has not been renewed for this year, given the “inefficiency of this cover.” According to the primary insurer, these changes will result in lower reinsurance premiums and largely offset in terms of earnings volatility risk.

Unchanged from last year, the group dropdown covers have also been purchased, which reduces the third and fourth event retention to $250 million, and the Australian dropdown programme continues to reduce retention for a third and fourth event to $150 million.

In New Zealand, buydown cover (including a prepaid reinstatement) has been placed to provide cover between NZ$200 million and the firm’s maximum event retention of $350 million, the same as in FY’25.

You can see Suncorp’s reinsurance tower for 2026 below.

Steve Johnston, Chief Executive Officer, Suncorp, disclosed that the renewal benefited from greater capacity in the reinsurance market, “Over the past couple of years, reinsurers materially reset their appetite for deploying capital to cover smaller or mid-sized events in both Australia and New Zealand.

“This, and increased reinsurance pricing, has seen the cost of insurance, particularly home insurance, increase rapidly. While the pricing of household policies will continue to reflect underlying risks and broader economic inflation, it’s pleasing that this major input cost appears to have stabilised.”

Suncorp undertook a comprehensive strategic review of its reinsurance programme following the sale of the Bank, exploring a range of markets and both traditional and alternative reinsurance structures, including whole of account quota shares and aggregate covers.

The review aimed to optimise return on equity and manage earnings volatility whilst retaining profitable exposures, and maximising long-term shareholder value.

Johnston stated, “The review concluded that our clear objectives of optimising outcomes for our shareholders and customers would be best met by the program announced today. In the current market, capacity has increased significantly for main catastrophe covers, and pricing has improved. For other types of cover, including aggregate covers, capacity remains limited and expensive.”

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