‘This one will be big’: Suncorp CEO Steve Johnston’s cyclone call

Suncorp boss says insurers are preparing for the worst with the monster cyclone bearing down on Brisbane and the Gold Coast, where losses are expected to quickly mount.

Cyclone Alfred whips up big surf and high tides at Snapper Rocks. Picture: Adam Head

Cyclone Alfred will be the first big test of the new government-backed $10bn cyclone insurance pool, with Suncorp chief Steve Johnston preparing for the worst from the biggest storm set to hit Brisbane, southern Queensland, and parts of NSW in decades.

Johnston and his disaster management team are running through the scenarios; monitoring the updates on Cyclone Alfred; and preparing a surge in customer claims from when the storm peaks late Thursday.

His customers are particularly vulnerable the deeper south along the coast Alfred starts to track, with the prospect of storm surges hitting the Gold Coast, he said in an interview from Suncorp’s Brisbane headquarters.

“There’s not been a cyclone in southeast Queensland of any significance for 40 or 50 years. And typically the houses there aren’t necessarily built to the same cyclone standards in areas north where there are regular cyclones. There’s a mix of housing stock of variable quality”.

“Category two cyclonic winds with rain – In terms of scenarios, this will be one of the bigger ones”.

Suncorp CEO Steve Johnston. Picture: Brendan Radke

Alfred will also represent the first big test for the three-year-old government-backed cyclone reinsurance pool. This is the scheme designed to pick up losses in the first 48 hours of the cyclone event, taking the pressure off the insurers. Already, early estimates of the potential for losses from Alfred are running past a billion dollars, with flooding and wind damage to hit buildings and cars.

The Bureau of Meteorology is warning heavy rain to continue all week across Brisbane, with destructive winds of more than 130km/h to hit on Thursday.

The insurance pool is designed to reduce the cost of reinsurance, which is designed to keep the pressure off insurance premiums in the cyclone-prone north.

The pool acts like a specialist reinsurer and is funded from insurers themselves through annual premiums. The facility has $10.5bn available for claim and is backstopped by a further $10bn Government guarantee.

After the first 48 hours, depending on when the cyclone is downgraded, insurers pick up losses on flooding and downstream impact. Losses from the after effects of the initial could be just as big as the storm itself, with northern NSW also vulnerable to floods.

For Suncorp, Alfred represents the first major insurance event since it sold off its bank to ANZ last year. The $4.9bn sale means Suncorp is now a pure play insurer with brands including AAMI and GIO, and has the biggest share of the Queensland market.

Given it no longer has the management distraction of running a mid-sized bank, everyone at Suncorp “from the board down is now 100 per cent focused on this and how we get ready for whatever eventuates,” Johnston said.

Suncorp has reinsurance protection in place up to $6.75bn for a single catastrophic event, as well as other reinsurance buffers.

Originally published as ‘This one will be big’: Suncorp CEO Steve Johnston’s cyclone call