Allianz Australia boss Richard Feledy urges Albanese government to fix flood cover

Allianz Australia’s boss has called on the Albanese government to extend its cyclone reinsurance pool to flood cover after a wash-up year of losses from natural catastrophes.

Allianz Australia boss Richard Feledy has called for the cyclone reinsurance scheme to be extended to cover all flood risks following a $4.5bn damage bill from the insurer’s operations in 2022.

The insurers’ results, filed with the corporate regulator, revealed a similar story to Allianz’s competitors in the Australian market, with a rapidly swelling damages bill coupled with increases to premiums.

Allianz Australia reported $7bn in premiums in 2022, up on the almost $6.2bn collected in 2021.

Claims expenses soared in the period, climbing from $3.8bn in 2021 to $4.56bn in 2022.

Reinsurance picked up $1.07bn of Allianz Australia’s cost, more than doubling the $440m recovered in 2021.

Mr Feledy said the floods that hit NSW and Queensland last year were the costliest natural catastrophe to ever hit the company in Australia.

“The severe flooding, alongside supply chain disruptions, skill shortages and building cost inflation, led to increased costs last year for all insurers,” he said.

“Despite these factors, Allianz Australia achieved solid financial results in 2022 with gross written premiums ahead of our plan and operating profit in line with plan.”

Allianz Australia posted a profit lift in the period, climbing to $312.4m, up on the $237m in 2021. This will see it return $190m to the European parent, after handing back $520m in 2022 in dividends.

The group is among the biggest insurers in Australia, with almost 10.9 per cent of the direct insurer market share, according to Morgan Stanley estimates.

Allianz MD Richard Feledy. Picture: Chris Pavlich/The Australian

Allianz Australia has been slugged with a flurry of costs from the floods, hiring 200 extra staff to process the huge volume of claims flooding the insurer in the wake of the disaster.

The insurer – which has more than 3.5 million policyholders across its Australian business – also handed out $5000 to customers in need, as well as providing temporary accommodation to policyholders affected by floods.

Mr Feledy said Allianz Australia was concerned continued natural catastrophes would create an affordability issue for customers in the years ahead.

But he said the group supported the extension of the cyclone reinsurance pool to cover all flooding risk in Australia “and for a government subsidy to be provided to the Pool so that it can make a meaningful impact on the affordability of insurance for all property owners with cyclone and flooding risks”.

“To further support affordability, Allianz was the first insurer to announce that it would enter the Federal government-backed Cyclone Reinsurance Pool from 1 January 2023,” he said.

“This means that thousands of Northern Australian residents living in high cyclone risk areas can now potentially benefit from lower home and contents insurance premiums.”

The cyclone reinsurance pool is backed by a $10bn government guarantee, aimed at offsetting the insurance cost of covering cyclonic events in Northern Australia.

Further to Allianz Australia’s 2022 financial results, the insurer revealed in the notes to its accounts that it expects to pay a further $65-$75m for flood damage from the inundation of parts of South Australia along the Murray River in January and February.

The notes also revealed the group is facing regulatory action in Australia, after identifying “several potential failures to comply with financial services laws, as part of its internal risk incident reporting and breach reporting assessment procedures, which may lead to the need to provide remediation or compensation to customers”.

Allianz Australia is facing an ongoing review by the Australian Securities & Investments Commission into historic pricing practices, which has seen several other insurers admit they failed to pass on discounts to customers.

RACQ warned last year it faced up to $220m in refunds to customers after failing to properly discount policies.