IAG increases annual catastrophe reinsurance by A$1bnJanuary 4 2019 by InsuranceAsia News Staff
Insurance Australia Group has increased its 2019 catastrophe reinsurance programme by A$1 billion (US$700 million) to A$9 billion at similar terms to last year’s reinsurance renewal rate.
Compared to last year IAG expects its underlying aggregate exposure to show a “modest” increase in Australia and growth of approximately 5% in New Zealand.
The program represents 67.5% of IAG’s book as 32.5% is already protected through a quota share agreed with reinsurers. The quota share includes Berkshire Hathaway paying 20% of claims for 20% of premiums, an agreement that started on July 1 2015, and the combined 12.5% quota share agreements with Hannover Re, Munich Re and Swiss Re that started on January 1 2018.
IAG retains the first A$250 million of each loss (A$169 million post-quota share), with three pre-paid reinstatements secured for the lower layer of the main program (A$169 million excess of A$169 million post-quota share).
The insurer said it has agreed an aggregate sideways cover which reduces the cost of a second event to A$175 million (A$118 million post-quota share) and a subsequent event to A$25 million (A$17 million post-quota share). The aggregate provides protection of A$475 million excess of A$375 million (A$321 million excess of A$253 million post-quota share), with qualifying events capped at a maximum contribution of A$225 million excess of A$25 million per event (A$152 million excess of A$17 million post-quota share).
The combination of all catastrophe covers in place at January 1 2019 results in post-quota share first event retentions of A$169 million for Australia and NZ$169 million (US$112 million) for New Zealand.
IAG’s shares responded positively to the news, finishing up 1.45% on January 3.
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