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9 January 2023Insurance

IAG rejigs reinsurance at 1.1: hikes retention & pays 20-25% more on XoL

Insurance Australia Group renewed 10% quota share reinsurance covers plus XoL catastrophe reinsurance covers with heightened retentions and price hikes of 20 to 25%, IAG has said.

The combination of all catastrophe covers as of January 1, including quota share, carry a first event maximum retention of $236 million, up from the $135 million in effect just after the July 1, 2022 renewals, IAG said.

“We have increased our first event retention reflecting inflation and global reinsurance market impacts," IAG’s chief financial officer Michelle McPherson said.

"This was a rational economic decision balancing the interests of all our stakeholders including minimising the impact of additional reinsurance costs on our customers.”

Non quota share expense for FY2023 increased by 20 to 25% to an expected range of $790 to $820 million, IAG said.

Including the quota share, which apply to 32.5% of natural perils, the 2023 catastrophe reinsurance programme provides a main cat cover for two events up to $10 billion with a $338 million retention plus $150 million drop-down, as well as third and fourth event covers of $250 million excess of $250 million, plus drop-down.

The quota share deals with Munich Re and Swiss Re, representing 10% of the 12.5% whole of account program that is due to expire on 30 June 2023, will be effective from 1 January 2023 for a five-year term.

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