Saturday, January 20, 2018

IAG shares 12.5% premiums, costs with reinsurers

In an effort to curb volatility in its earnings, Insurance Australia Group (IAG) announced on Friday that it will share 12.5% of its premiums and costs with Munich Re, Swiss Re, and Hannover Re in a spate of deals that will see Australia’s biggest general insurer releasing capital.

The agreement provides that the three reinsurers will get an aggregate 12.5% of the company’s consolidated gross earned premium and take 12.5% of claims and expenses from January 1, 2018, IAG said in a statement.

In return, IAG will receive an undisclosed flat fee. IAG chief executive Peter Harmer said the deal eliminated downside earnings risk from a portion of the business while retaining significant exposure to earnings upside.

Supporting analysts’ earlier expectations that the company is set to launch a share buy-back to return capital to investors, Harmer said the insurer is determined not to sit on excess capital.

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