Insurance Australia Group Limited (
IAG) has extended the quota share agreement with
Munich Re that covers 30 per cent of
IAG’s compulsory third party (CTP) business.
The new agreement took effect from 1 July 2016 and will run for a minimum of four years, with an option for a further two years. The pact extends the existing quota share agreement for CTP businesses written in New South Wales and Australian Capital Territory; and included South Australia, where one of IAG’s brands started as an underwriter.
The original agreement, which was enforced on 1 July 2013 for a minimum of three years with an option for a two-year extension, was designed to enhance IAG’s capital efficiency.
In a statement, IAG said that before the agreement, CTP accounted for less than 10 per cent of its gross written premium, yet roughly a quarter of its regulatory capital requirement.
The quota share agreement with Munich Re operates alongside IAG’s 10-year, 20 per cent whole-of-account quota share pact with
Berkshire Hathaway. From July 2015, a total of 50 per cent of IAG’s CTP business is subject to quota share.
Related stories:
IAG loses key executive
Fitch affirms Munich Re’s AA IFS rating; outlook stable
