IAG utilises cheap reinsurance
Insurance Australia Group (IAG) has increased its catastrophe reinsurance protection for the calendar year commencing 1 January 2014 by $600 million – saying it has done so because of “favourable reinsurance market conditions”.
The programme provides protection of up to $5.6 billion, compared to $5.0 billion in 2013.
Nick Hawkins, IAG’s CFO, said the group had taken the opportunity of more favourable reinsurance market conditions to bolster key aspects of its catastrophe protection.
“Our catastrophe reinsurance programme remains an intrinsic part of our capital management strategy," said Hawkins. "The structure of the programme is similar to that of prior years, and contains an element of multi-year cover, notably up to the $500 million layer and above $4 billion.
"As we indicated on 16 December 2013, we have also taken the opportunity to include within the main programme the previously standalone cover for our AMI operation in New Zealand. This is one year ahead of the originally intended timetable.
"Alongside the calendar 2014 programme announced today, we have previously advised of a separate cover of $100 million in excess of the Group's natural peril allowance of $640 million, which runs in line with our current financial year and further strengthens our overall protection."
Hawkins went on to explain that IAG's integrated catastrophe reinsurance programme for calendar 2014 includes a main catastrophe cover for losses up to $5.5 billion, including one prepaid reinstatement; a $100 million upper layer providing earthquake cover in respect of Australia and New Zealand, extending from $5.5 billion to $5.6 billion; a buy-down arrangement that reduces the maximum cost of a first event to $175 million and a second event to $150 million; and an expanded aggregate sideways cover which reduces the cost of subsequent events to $25 million.
IAG's catastrophe reinsurance covers all territories in which IAG operates, with the exception of the Group's joint venture interests in India and China which have their own reinsurance arrangements.
