Premiums may rise as Suncorp hedges bets

Insurance major Suncorp has reported a "moderate" increase in the cost of its catastrophe reinsurance cover, which may push household insurance premiums up again after a series of catastrophes pushed up premiums last year.

Reinsurers - which effectively underwrite insurance providers against large insurance claims - have continued to tighten the screws after incurring catastrophe-related insured losses of US$76 billion (NZ$95b) worldwide in the first six months of last year. Higher reinsurance rates generally translate into higher premiums for consumers.

Suncorp's home insurance premiums rose 13 per cent last financial year, with most other insurers posting similar increases.

Suncorp also sells insurance under the Vero, GIO and AAMI brands.

Jamin Smith, a spokesman for the Queensland insurer, said the higher cost of reinsurance had contributed to higher premiums in the past but he said it was too early to predict the effect on premiums this financial year.

But yesterday Suncorp said the increase would come despite an effective reduction of the upper limit of its main catastrophe programme from A$5.8b to A$5.3b.

It also confirmed a confidential arrangement, believed to be with Warren Buffett's Berkshire Hathaway, to reduce its exposure to the Queensland market.

Thirty per cent of its Queensland premiums will go to Berkshire Hathaway; in turn the American conglomerate will pay out the proportional claims. The insurer was hit particularly hard by the Queensland floods, which began in December 2010.

Suncorp said claim levels remained high, in part because of heavy rains in Queensland and flooding in northern Victoria and southern New South Wales.