Suncorp – It’s time to act on climate change | RenewEconomy

Suncorp – It’s time to act on climate change

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For the first time in its history, Suncorp has listed climate change as a specific business risk. But it’s still not convinced by the science.

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On Thursday, Queensland financial service group Suncorp reported a full year net profit of $1.038 billion, down 8% from 2014/15 ($1.133 billion). Suncorp’s general insurance division caused all the damage, as it returned a net profit of $624 million, down 17% from 2014/15 ($756 million).


Suncorp claims to have suffered from “a record run of natural hazard events in 2015”, paying out $730 million on natural disasters in 2015/16, $60 million more than provisioned. But claims of a record run are somewhat overstated, given Suncorp paid out a whopping $1.068 billion on natural disasters in 2014/15.

This is familiar territory for Suncorp. In fact, natural hazard claims have exceeded provisions for nine out of the last ten years. This is a direct hit to profitability of $1.963 billion in a decade. To put that in perspective, the 2016 interim and final dividends (30 and 38 cents respectively) totalled $875 million. So in effect, Suncorp’s poor run of natural hazard claims have cost shareholders over two years worth of dividends in the last decade. Climate change has fundamentally changed Suncorp’s business, yet you wouldn’t know it from their rhetoric.

Interestingly, when the former CEO Patrick Snowball was asked at the 2015 AGM why Suncorp repeatedly failed to underestimate the cost of natural disasters, he explained that he had been forced to add a “management overlay” to the provisioned amount. And yet, despite this additional allowance, natural hazard claims still exceeded provisions in 2015/16. Looking at the timeline of claims in 2016, Suncorp appeared to be on target, only to be tipped over by the East Coast Low in June.

For the first time in its history, Suncorp has listed climate change as a specific business risk. Under the previous CEO Patrick Snowball, climate change didn’t get a single mention in six years of annual reports. This may be the work of new CEO Michael Cameron, who agrees that there is clear evidence of climate change.

However, in an interview with the Australian Financial Review yesterday, Cameron was asked if he believed humans were responsible for changing the climate, he replied, “the extent of influence by humans is still difficult to quantify.”

Why does this matter? Well, as a top 20 ASX company, and Australia’s third largest insurer, Suncorp has an obligation to its customers, staff and shareholders to have an honest conversation about climate change. Its executives have access to lawmakers at both state and federal level. It should be using this access to stress the need for immediate and decisive action on climate change, not the muddled policy framework we have in place now.

 Suncorp has been active in forums to mitigate the effects of climate change, particularly in Queensland communities prone to flood and cyclones, which deserves recognition. But Suncorp can no longer take the softly, softly approach to climate change. A comprehensive policy is needed; which should encompass their investments, their underwriting and their approach to lobbying government, at all levels.

Additionally, Suncorp manages in excess of $23 billion in investments. If their CEO doesn’t believe that mankind is playing a role in driving dangerous climate change, then it’s highly likely the group isn’t managing climate risk in its portfolio.

Particularly given Suncorp’s poor investment returns in 2015/16, which was unlikely to have avoided the bankruptcies in the coal, oil and gas sectors, this is foolishness writ large.

Source provided by Market Forces.

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  1. Rob G 4 years ago

    In the end climate change will make insurance just unaffordable. Think 20, 30 and 50 years ahead and the cost of damage will be impossible to cover. They will learn the hard way. Either they get the screws turning on governments globally or the look for a new profession.

  2. Brian Tehan 4 years ago

    “the extent of influence by humans is still difficult to quantify.”
    It’s well quantified by scientists – you know, the experts. If you use actuaries to quantify risk, then you’re being irresponsible if you don’t take into account climate change that is increasing the risks year on year. Then again, it’s Queensland….

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