Suncorp CEO Patrick Snowball admits he never saw anything like the volume of claims he has experienced in the last 12 months in Australia and New Zealand, during his two decades at Aviva.
In the UK he was involved with the 1991 windstorms and the 2000/01 floods. However, speaking exclusively to Post Online, he notes that although one recent downpour in Australia resulted in "flooding equivalent to the size of the whole of France and half of Germany," it only cost A$130m (£83.4m), just under a third of the 18 minute hailstorm in March last year, which brought about insured damage worth A$350m.
Huge weather extremes
"That cost was huge. We would usually get 65 000 claims a month that time of year, but that March we got an additional 67 000 claims, because we also had Perth floods. But you do get these huge extremes linked to micro weather patterns," he adds.
Reflecting on the more recent incidents of flooding at the tail end of 2010, and the response of the Australian Stock Exchange to his two and a half year year tenure, he continues: "The general consensus at the 2010/11 half year is that we are on track, or ahead of, the re-engineering plan we set out at the beginning.
"We always said it would take 18 months to turn the general insurance business around, two years for the bank and three years for the life group. And we are exactly on track with each of them.
"So we had a very good reception from the shareholders. Obviously everyone would have liked to see more of a dividend, but usually we would have expected A$230m of adverse weather, and we had A$182m on top of that."
Reinsurance programme full
Since the turn of the year, Mr Snowball's business has also seen the Brisbane floods, another earthquake in New Zealand, Cyclone Yasi and the floods in Melbourne.
"So we are indicating that our [reinsurance] cat programme is absolutely full. We do have aggregate cover, which acts as a shock absorber on the profit and loss account, and that has gone too. Last year we had $150m left at the end of the year," Mr Snowball comments.
"So it has been the most abnormal year. But it has also been amazing to see how well this business works under pressure. Because last year we had six insurance companies, six claims teams, and we would sprint all over the place. But in October - for instance - we unveiled a single assessor brand, combining all of our loss adjusting and vehicle assessment teams. So wherever we have been since then, we have been able to act as one company, with many brands."
Staggered by staff response
Mr Snowball admits that he is "staggered" by how people have coped during the recent hard times, but adds that the business has been able to gain some collateral out of the adverse weather because, for instance, in Queensland, it is the only company that gives flood cover. As a result of this - and the fact he claims Suncorp insures 41% of Australian households - it has been "front of mind for everybody".
Although Mr Snowball may have never seen so many costly incidents in such a short space of time while at Aviva, one thing he has been used to is insurance coming under the political microscope in the wake of major claims events in the UK.
"There is going to be a huge debate about whether earthquake cover is going to continue," he says. "The principle of insurance is like the isosceles triangle, so your breadth is cover is basically your depth of exposure. But the problem in New Zealand is that on the surface, there is an isosceles triangle, but what is emerging is that the breadth is too narrow for the depth.
"We have got some very significant losses, and reinsurers are more worried about this than they are about Japan, because my sense is that the exposure to that event is not so great."
Top three nat cat programme
Suncorp is set to renew its reinsurance programme on the 30 June, and Mr Snowball notes that the group has "one of the three largest cat programmes in the world", with 75 reinsurers on the panel, despite the fact - in percentage terms - Australia only represents one percent of the global insurance premium.
Returning to flooding, Mr Snowball notes in 2008 the Australian insurance market looked at introducing a single wording, but that it was turned down by consumer bodies as anti-competitive.
"Out of [the recent adverse weather] will come more attention to flood cover, and there will be more transparency with the wording, and there will be more insurers writing this business."
No government intervention needed
Mr Snowball mentions that 31% of the population have flood cover, and only a third of people had flood insurance in Brisbane. He adds that rival Insurance Australia Group, which offers this cover in New South Wales, may "step up to the plate" in more territories, adding: "What we are saying to the Australian government is it should not step in, because there is a commercial solution, and it is already carrying huge reserves going forward."
However, in the short term Mr Snowball has fears it may become a political football, commenting: "My only concern is that some politicians are being a little bit vocal in saying it does not matter if people have not got insurance, you should pay the claim anyway. And that is a serious thing, and the moral hazard is huge. But I think that has [after some initial noise this has] virtually gone."
Mr Snowball reflects: "The halo effect [of the recent events] on the Suncorp brand has been great. It has cost a lot of money and we have had to put up our rates, but it has had a halo effect."
Flat out for six months
He concludes household rates were put up 10% after last year's Melbourne floods, and he expects them to go up 10% again.
As for Mr Snowball and his staff, he notes that the business has been "flat out for six months", quipping: "We have travelled such a long way, so quickly and we just need a breather."
