Uncertainty remains over IAG's claims reserves

Uncertainty remains over IAG's claims reserves | Insurance Business

Uncertainty remains over IAG
IAG New Zealand CEO Jacki Johnson says the company’s claims reserves are being reviewed virtually ‘claim by claim’ with about $100 million currently being paid out per month.

However, she admits IAG only has control of the situation up to a point.

“We’ve got a handle on everything that’s within our control, but the one thing we don’t [have] is some of the EQC claims that are going over cap, we’re still getting some through,” Johnson told Insurance Business.

“We have taken a reserving position that we think is conservative and have built that in but it would only take some of those numbers to be different to what EQC has flagged to us and that will end up with a position that we will have to review,” she said.

The company released its FY2015 results on Friday and confirmed its gross claim reserves for the February 2011 earthquake had now exceeded the Group’s $4 billion reinsurance limit.

As well as new claims coming through from EQC, the reasons given for the blowout included an increase in forecast repair costs and a series of adverse court judgments which had affected the broader insurance industry.

However, IAG was still confident it was on track for its Canterbury rebuild to be largely complete by mid-2016.

Speaking about the Lumley integration, which had boosted the year’s GWP growth by 19.4%, Johnson said she was pleased that IAG hadn’t lost any of that business and that some organic growth had also come through the company’s digital channels.

She said IAG New Zealand would be working hard to keep its disciplines of underwriting and pricing of the commercial risk with the commercial market being so competitive, and there had been a lot of activity around managing the company’s expense space in order to do that and remain affordable to New Zealand.

Johnson pointed out that while underwriting profit had decreased, investment income was up which was a result of the new solvency regime in New Zealand which required greater capital.
“So we’ve got that balance,” she said.

While Group CEO Mike Wilkins had earlier reiterated the wider company’s commitment to continued Asian expansion, Johnson stressed the importance of the New Zealand division within the group, which currently represents 20% of the income lines for IAG as a whole.

“I’ve had nothing but support in terms of the Group board endorsing that, so for me that is a signal that the group sees it as a very important part of the business,” she said.