IAG buys aggregate cat reinsurance and stop loss cover
Insurance Australia Group (IAG) has confirmed it has added aggregate catastrophe reinsurance cover for the 12 months to June 30, 2021, which will provide $350 million of gross protection in excess of $400 million.
The insurer has also bought stop-loss protection for retained natural perils which will run in line with full year 2021.
These purchases are part of the insurer’s initiatives to strengthen its overall reinsurance position, it said.
IAG said the cat reinsurance cover enables it to move its aggregate protection to a financial year format, meaning it can avoid the clash with peak period catastrophe activity that “can disrupt the renewal process at calendar year-end”.
“This new protection will overlay the existing aggregate protection for the balance of calendar 2020, with the calendar year aggregate cover not being renewed from January 1, 2021,” the company said.
The stop-loss cover will provide protection of $100 million in excess of $1.1 billion for the 12 months to June 30, 2021.
IAG will publish detailed full year 2020 results on August 7, 2020, but ahead of that the insurer published an update on its results for the year ended June 30, 2020. It said it expects to see growth of 1.1 percent in gross written premiums despite adverse effects from business exits completed in full year 2019 and lower compulsory third party pricing, as well as a modestly negative estimated COVID-19 impact in the second half of 2020.
Peter Harmer, the insurer's managing director and CEO, said: “We have experienced an immensely challenging second half to the 2020 financial year, characterised by severe natural peril activity, the disruption caused by the COVID-19 pandemic to our people, customers and suppliers, and the marked volatility in investment markets which has adversely impacted our results.”
But he said he was proud of the way IAG colleagues had risen to the challenges through a sequence of major natural peril events in the middle of the financial year and the emergence of COVID-19.
“We have seen some softening in our underlying margin in the second half. This stems from the combination of lower investment returns from diminishing interest rates, an increased reinsurance expense as we bolstered our protection following heavy perils incidence early in the calendar year, and some deterioration in Australian commercial long tail loss ratios.
“We enter full year 2021 with a strong balance sheet and enhanced reinsurance protection, and are well-equipped to negotiate the challenges and opportunities that a post-COVID environment will present,” he said.
