IAG confirms finalisation of 2021 catastrophe reinsurance programme

IAG confirms finalisation of 2021 catastrophe reinsurance programme | Insurance Business Australia

IAG confirms finalisation of 2021 catastrophe reinsurance programme

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.