IAG has announced the finalisation of its catastrophe reinsurance programme for the 2021 calendar year, which will see the company maintain its gross reinsurance protection cover at up to $10 billion, the same level as 2020. In a press release, the Australian insurer said that this has been placed to the extent of 67.5% to “reflect IAG’s cumulative whole-of-account quota share arrangements.”
Among the key features of the programme are:
- Its inclusion of main catastrophe cover for losses up to $10 billion, including one prepaid reinstatement.
- IAG retention of the first $250 million of each loss, which is the same as for 2020.
- Three repaid reinstatements secured for the lower layer of the programme.
- An aggregate sideways cover for the 12-month period to June 30, 2021.
This provides $350 million of protection in excess of $400 million. Taking effect from January 01, 2021, qualifying events are capped at $200 million excess of $50 million per event.
IAG highlighted that it had experienced a modest increase in reinsurance rates during the renewal process, with the overall expense outcome in line with expectations. It noted that approximately 65% of the gross main catastrophe programme for 2021 is protected by multi-year coverage, ensuring future reinsurance cover.
Taking into account the effects of IAG’s quota share, the retentions drop to $169 million for Australia (NZ$169 million for New Zealand) for both the first and second events, while dropping to $34 million (NZ$34 million) for a third loss event.
The insurer noted it will offer stop-loss protection for retained natural perils, providing protection of $100 million in excess of $1.1 billion ($68 million in excess of $743 million, post-quota share) for the 12 months to June 30, 2021, with an attachment point close to the FY21 natural perils allowance of $975 million ($658 million post-quota share).
Looking to IAG’s business interruption provision for the six months to December 31, 2020, it stated it will include the $1.15 billion pre-tax earnings impact of the provision for business interruption claims announced on November 20, 2020, as part of net corporate expenses in its first-half investor report.