3 January 2018Insurance

IAG reduces cat coverage; agrees quota share with big European reinsurers

Australian insurer IAG has reduced the coverage provided by its catastrophe reinsurance programme having entered into a quota share agreement with Munich Re, Swiss Re and Hannover Re.

The insurer also said it experienced modest upwards pressure on like-for-like reinsurance rates during the renewal process, though the overall expense outcome in line with the associated assumption in its FY18 guidance.

It said the programme has been constructed in a similar manner to prior years and provides up to A$8 billion ($6.25 million) gross reinsurance protection.

But the key difference is that has been placed to cover 67.5 percent of the insurer’s book, a big decrease from the 80 percent it covered the year before. The reduced placement allows for a combined 12.5 percent quota share agreements with Munich Re, Swiss Re and Hannover Re which commenced on 1 January 2018. It also reflects a 20 percent quota share agreement with Berkshire Hathaway which has been in place since 1 July 2015.

The insurer revealed that its main catastrophe protection covers losses up to A$8 billion, including one prepaid reinstatement. IAG retains the first A$250 million of each loss (A$169 million post-quota share), with three prepaid reinstatements secured for the lower layer of the main program (A$169 million excess of A$169 million post-quota share).

In addition to this, an aggregate sideways cover which provides protection of A$475 million excess of A$325 million (A$321 million excess of A$219 million post-quota share), with qualifying events capped at a maximum contribution of A$225 million excess of A$25 million per event (A$152 million excess of A$17 million post-quota share). This cover reduces the maximum cost of a second event to A$125 million (A$84 million post-quota share) and a subsequent event to $25 million ($17 million post-quota share).

Compared to calendar 2017, it said underlying aggregate exposure has increased modestly, with growth in short tail personal lines partially offset by reduced commercial portfolios, in both Australia and New Zealand.

The programme covers all territories in which IAG operates, with the exception of its joint venture interest in India which has its own reinsurance arrangements.

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8 December 2017   Australia’s IAG has entered into three agreements to quota share a combined 12.5 percent of its consolidated business from Jan. 1, 2018.
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