Insurance Australia Group Limited (IAG), one of Australasia's largest general insurers, will put its external audit services to competitive tender and will not invite KPMG to participate. The consultancy has audited the insurer since it listed as a public company in 2000. The announcement was released to the Australian Securities Exchange (ASX) today.

The decision makes IAG the largest general insurer in the ANZ market to change its audit arrangements during the current scrutiny of KPMG and the second major financial institution to do so in under a month.

IAG attributed the decision to the length of the relationship rather than to any concern about the firm. The company said it had been "well served" by KPMG since its listing, with a long-standing practice of regular lead audit partner rotation and that the decision to conduct a tender reflected the board's consideration of auditor tenure. With that focus on tenure, the announcement said KPMG will not be invited to participate.

The tender will run during the 2027 financial year. Under sections 329 and 327D of the Corporations Act 2001 (Cth), shareholders will be asked to approve the appointment of the successful firm.

A second major exit in a month

The announcement lands during sustained scrutiny of KPMG Australia's audit practice by federal parliament and the corporate regulator.

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Last month, Macquarie Group announced that it would drop KPMG as auditor, recommending incumbent PwC to shareholders instead. Macquarie said the decision followed continued scrutiny of KPMG's audit practice, including information exposed by the Parliamentary Joint Committee on Corporations and Financial Services and its own formal enquiries into KPMG's capacity to deliver the audit. Macquarie said its boards held concerns on two of the criteria considered in its 2025 tender: capacity to deliver, given several key members of the proposed KPMG audit team had departed, and culture, including a culture that transparently discloses issues.

KPMG said at the time that while it was disappointed by the outcome, it respected the decision. The firm has separately said it is facing the consequences of its past failings. The parliamentary committee held a further public hearing in Sydney early this month.

What IAG has not said

IAG's announcement does not refer to the inquiry, to any regulatory investigation, or to any matter concerning KPMG's conduct. 

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For KPMG, 26 years is a long engagement and periodic retendering of external audit is an established governance practice independent of any question about a particular firm. IAG also pointed to its history of rotating the lead audit partner, which is the mechanism regulators have historically relied on to manage familiarity risk within a long relationship.

IAG has also not indicated whether the decision affects any non-audit work KPMG performs for the group.