18 November 2016 Insurance

IAG estimates recent cat losses may cost it A$200 million

Australian insurer IAG has said it anticipates that the recent trans-Tasman storm and New Zealand earthquake events may cost it up to A$200 million net, though it stressed the gross cost remains uncertain.

It said that after consideration of its reinsurance protection, IAG continues to expect its FY17 net natural peril claim costs will be in line with its A$680 million allowance.

It also confirmed the net natural peril claim costs incurred up until the end of October 2016 were approximately A$140 million. But since that date, there have been two peril events of note.

Peter Harmer, IAG managing director and chief executive officer, said: “Our thoughts go out to everyone affected by the latest natural peril events in Australia and New Zealand. We know this will be a difficult time for many, and we are focused on doing all we can to help our customers, including enabling them to make insurance claims as quickly and easily as possible.”

The anticipated combined net cost of A$200 million for the two events comprises a A$20 million retention applicable to each event, plus the residual deductible of approximately A$160 million attaching to IAG’s calendar 2016 aggregate reinsurance cover as at the end of October.

Assuming a net cost of A$200 million from the latest events, year-to-date net natural peril claim costs would be approximately A$340 million, compared to IAG’s full year allowance of $680 million, which is included in its FY17 reported insurance margin guidance of 12.5-14.5%. Given the strength of its reinsurance cover, which includes A$96 million of perils protection immediately above A$680 million on a financial year basis, IAG retains its existing reported insurance margin guidance range.

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