Insurance Australia Group (IAG) has announced the successful placement of its catastrophe reinsurance program for the 2024 calendar year. Alongside this, the company provided an update on the natural peril events that occurred in December 2023.
The 2024 catastrophe reinsurance program, in alignment with IAG’s whole of account quota share (WAQS) arrangements, which account for 32.5% of natural perils, includes several key components. The program offers main catastrophe cover for two events up to $10.5 billion, with an initial attachment point at $500 million.
Additionally, there is drop-down cover of $150 million, which reduces IAG’s retention on the first two events to $236 million. This is equivalent to 67.5% of $350 million, with an extra premium payable if the drop-down cover is activated for a first event. The program also provides specific drop-down cover for a second event in New Zealand, and third and fourth event covers.
Furthermore, for the remainder of the fiscal year 2024, as announced on July 7, 2023, IAG’s reinsurance cover includes extra third and fourth event protection and an aggregate cover, with various conditions and caps applied to these protections.
IAG chief financial officer William McDonnell commented on the stability of the global reinsurance markets in 2023, which enabled IAG to secure more extensive reinsurance protection than initially expected.
“The cost of the overall program is broadly consistent with our expectation and our guidance of a FY24 reported insurance margin of 13.5% to 15.5%,” McDonnell said.
Reflecting IAG’s cumulative WAQS arrangements, the reinsurance program is placed at 67.5%. After considering all reinsurance protections, IAG’s maximum event retention stands at $236 million as of January 1, 2024.
Regarding the natural perils events of December 2023, IAG reported receiving approximately 17,000 claims from various incidents across Australia. These claims include about 500 from ex-Tropical Cyclone Jasper and around 9,000 from severe storms around Christmas Day.
Nick Hawkins, IAG managing director and CEO, spoke about the company’s response to these events through its NRMA Insurance, CGU, and WFI brands.
“The weather events that impacted communities across the holiday period were devastating and our thoughts are with those who lost loved ones during this difficult time. Our property assessors and partner builders are on the ground in affected areas supporting customers with emergency assessments and make-safe repairs. The safety of communities and our customers is our top priority,” Hawkins said.
IAG’s maximum event retention in December 2023 was $169 million, and the company is currently assessing the ultimate cost of the claims from the December natural perils. Preliminary indications suggest that IAG’s natural perils costs are below the allocated allowance for such events.
IAG is scheduled to announce its financial results for the first half of 2024 on February 16, 2024. This announcement is expected to provide further insights into the company’s financial performance and the impact of its reinsurance strategies.
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