IAG shares sink as insurer flags $169m hit as it tallies cost of NSW hailstorm

Suncorp and IAG shares have dived as hail damage claims following Sydney’s “catastrophic” hailstorm top 25,000.

A car damaged by hailstones in Sydney. Picture: AAP

The sharemarket left Australia’s listed insurance companies as battered as their hail-damaged customers on Friday, as they dealt with thousands of claims in the aftermath of the worst hailstorm to hit Sydney and the NSW central coast in almost 20 years.

IAG, the nation’s largest insurer, tumbled 4.3 per cent to $6.65 while Suncorp sank 3.9 per cent to $12.42. QBE edged up 0.1 per cent to $9.76.

As at 2pm (AEDT) on Friday, policy holders had lodged 25,000 insurance claims worth over $125 million, according to the Insurance Council of Australia. The Insurance Council declared the hailstorm a catastrophe, making it the fifth catastrophic natural disaster this year.

In declaring the catastrophe, the Insurance Council activated its disaster hotline to assist policyholders, and established an industry taskforce to address and identify issues that arise and work directly with emergency services, agencies and the government.

“The catastrophe declaration means insurers will make claims from this storm their priority,” Insurance Council of Australia media relations general manager Campbell Fuller said. “They will triage claims to ensure the worst-affected policyholders receive urgent attention.”

Mr Fuller said about three-quarters of the claims received were for damage to cars and other vehicles, typically smashed windscreens and dented panels.

Insurer IAG, which operates the NRMA Insurance brand, said that the hailstorm would cost it $169m before reinsurance kicked in, while rival Suncorp, which operates a stable of insurance brands including AAMI, GIO, bingle, Apia and Shannons, told the market its reinsurance program meant the maximum financial impact would be $250m.

Local insurers hedge their risks by reinsuring with other, usually global, insurance providers.

IAG said it would be setting up vehicle hail repair units across Sydney to help deal with the high volume of claims.

“Our priority is to help customers affected by the hailstorm as soon as possible,” IAG Australia Division chief executive Mark Milliner said.

“Extra employees have been allocated to the claims and repair management teams and our online claim lodgement facility is assisting the rapid assessment of claims.”

Morgan Stanley equity analyst Daniel Toohey told The Australian that IAG’s first-half results would be disappointing due to the impact of the hailstorm, but said the company is still expected to hit its reported margin guidance of between 16 per cent and 18 per cent on a full-year basis.

Mr Toohey also said the massive volume of cars needing repairs could result in a need to lift premiums.

“The risk from events like this is that it creates a strain on the claims handling and the smash repair industry, that the risk to claims inflation is significant, which often can result in a pricing response to adjust for that,” he said.

“The sheer quantum of cars that need to be fixed could possibly keep people busy for years.”

Thursday’s hailstorm came amid a trying year of natural disasters for insurance companies.

In March, bushfires in NSW and Victoria resulted in $82.5m in insured losses and Cyclone Marcus caused $62m in claims, with $16.8m from floods in Queensland. In May, storm and flood damage around Hobart resulted in $99.6m in insured losses.

IAG said provisions for natural disasters in the 2019 financial year currently amount to as much as $430m pre-tax, post-quota share. Suncorp said that total natural hazard costs for the six months through December were in line with its $360m allowance.

Chief executive Michael Cameron said Suncorp would set up dedicated hail assessment centres for hail-damaged vehicles.

“Our teams are working around the clock to help provide support to our customers, assisting them in getting claims assessed as soon as possible and also providing emergency make-safe repairs,” Mr Cameron said.

A QBE spokesperson told The Australian that the company didn’t yet have a number or value for the claims but they did say that motor claims were making up the bulk of them.

“We’ve already initiated our Catastrophe Management Plan and have additional team members in place to take calls and lodge claims,” the spokesperson said.

“We’ve also mobilised our assessors and tradespeople to ensure we can allocate support as quickly as possible and be there for our customers in their time of need.”

A 1999 Sydney hailstorm still ranks as Australia’s most expensive disaster in terms of insurance payouts.

That event resulted in losses of $1.7 billion — equivalent to $5.6bn in today’s terms — to cover damage at the time across thousands of houses and cars, according to figures compiled by the Insurance Council of Australia.