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Victorian lockdowns may cost Suncorp another $125 million

Business

Suncorp’s provisioning for the impact of the COVID-19 pandemic has jumped to $195 million with the potential of a $125 million bill in the current half of the year.

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The true cost is likely to depend on a test case which would decide whether a pandemic is covered in its business interruptions policies.

The banking and insurance company said it was confident the intention of its policies was clear and that they “do not respond to pandemics”. However, it has decided on a prudent option and said its provisioning was sufficient to cover claims in 90 per cent of possible outcomes, including an unfavourable judgment in the test case being run by the Insurance Council of Australia.

Suncorp had previously made a provision in last financial year’s accounts for a $70 million impact.

“The group has now assessed the potential for business interruption claims in relation to COVID-19 from the second Victorian lockdown, commencing on July 8, adopting a consistent prudent valuation approach to the initial provision,” the company told the ASX this morning.

“Taking into account the breadth and depth of the Victorian lockdown, the group now expects to recognise another $125 million (pre-tax) provision for potential business interruption claims in the first half of the financial year, assuming no further material COVID-19 outbreaks.

“This will take the group’s total provision for potential business interruption in relation to COVID-19 to $195 million.”

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