IAG ups cat reinsurance cover by US$700m

January 6 2020 by Andrew Tjaardstra

IAG has finalised its catastrophe reinsurance programme for 2020, increasing its reinsurance protection to A$10 billion (US$6.94 billion), compared with A$9 billion (US$6.24 billion) in 2019.

Nick Hawkins, IAG’s chief financial officer, Nick Hawkins commented: “We have … increased the multi-year arrangements we have with some of our largest reinsurance counterparties.”

He added: “Combined with our existing quota share arrangements, this means around 70% of our gross main catastrophe program for calendar 2020 is protected by multi-year coverage, providing greater certainty of future reinsurance cover.”

IAG experienced relatively stable reinsurance rates during the renewal process and will retain the first A$250 million (US$174 million) of each loss.

The insurer has a a ten-year 20% quota agreement with Berkshire Hathaway, which commenced July 1 2015; and combined 12.5% agreements with Munich Re, Swiss Re and Hannover Re which came into force on January 1 2018, with an average duration of around five years.

IAG also has obtained a reinsurance cover for retained natural perils which runs in line with the financial year (stop-loss cover) and provides post-quota share protection of A$101 million (US$70.2 million) in excess of A$675 million (US$469 million) for the 12 months to June 30 2020. This is A$34 million (US$23.6 million) above IAG’s financial year 2020 natural perils allowance of A$641 million (US$445.5 million).

ByJanuary 2 IAG had received over 2,800 bushfire-related claims since the beginning of September with in excess of 1,500 of these lodged since the start of December; the majority are residential related.

IAG Australia’s chief executive Mark Milliner said: “Our priority is to help customers affected by these terrible events as soon as possible, while minimising the personal risk to those facing these ongoing catastrophes.”

He added: “Our claims teams are identifying and calling those customers potentially impacted when appropriate, while our dedicated major event claims teams are contacting customers as soon as claims are lodged.”

IAG anticipates its net natural peril claim costs for the six months ending December 31 will approximate A$400 million (US$278 million) post-quota share, compared to a corresponding perils allowance of A$320 million (US$222.4 million).

Overall bushfire events are anticipated to contribute over A$160 million (US$111 million) of net claim costs in H1 2020, post-quota share.

In addition to the bushfires, the period included significant hailstorm events on the Sunshine Coast in Queensland and at Timaru in the southern Canterbury region of New Zealand, both of which occurred in November.

IAG will report its results for the first half of the 2020 financial year on February 12.


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