Suncorp sets aside $195m for COVID claims

Suncorp has set aside an additional provision for potential business interruption claims stemming from the second Victorian lockdown.

Suncorp has now set aside $195m against potential COVID claims. Picture: James Robertson

Insurance major Suncorp has set aside an additional $125m provision for potential business interruption claims stemming from the Victorian lockdown as the state was battling its second wave COVID outbreak.

The increase takes Suncorp’s total cover for potential payouts linked to claims from the pandemic to $195m.

The insurer, which is behind brands including Suncorp, AAMI and GIO, said while it remained confident the “intention” of its business interruption policies was clear and that they did not pay out for pandemics, the provisioning was a prudent approach.

The comments come as the Insurance Council of Australia runs a business interruption insurance test case in NSW, aimed at removing any uncertainty over insurers obligations in paying out to cover pandemics.

The industry maintains that policy wording makes it clear that insurers are not exposed to pandemics, however this is being tested through a series of legal actions around the world.

The NSW test case is considering the issue of policy wordings that refer to the Quarantine Act.

“In assessing provisioning for BI (Business Interruption), the Group has considered its exposure to BI claims. Within this, the Group has considered the wide range of industries and geographies affected by COVID-19. Some allowance has been made for factors that could mitigate BI claims costs, including government stimulus measures, rental reductions, and alternative revenue streams,” Suncorp said in a statement.

Suncorp had already set aside a provision of $70 million (pretax) was for potential Business Interruption claims in relation to Covid up to end-June. The new provisioning takes this to $195m.

Suncorp said given its approach to provisioning an unfavourable judgment in the industry test case outcome is not expected to affect the total business interruption provision.

The overall impact of COVID-19 across Suncorp’s insurance business for the first half of the financial year 2021 is expected to be “broadly neutral”, the company said.

The includes the group’s assessment for potential business interruption (BI) claims in relation to Covid in financial year 2021 from the second Victorian lockdown, temporary short-term reductions in claims for motor accidents, continued customer relief measures including discounts and three-month premium waivers, and ongoing costs incurred as a result of on-shoring a range of critical business processes.

Meanwhile Suncorp said credit quality at its banking arm “remains strong” with total lending losses of $3m for the September quarter.

At the end of September, Suncorp’s bank had $3bn of loans under temporary loan deferral arrangements, representing 4 per cent of the housing portfolio and 7.6 per cent of the small to mid-sized business portfolio.