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- Insurance Australia (IAG) finalises its catastrophe insurance program for 2022
- The company will maintain its gross reinsurance protection cover at up to $10 billion
- IAG will retain the first $250 million of each loss, with drop down cover of $50 million if a second or third event occurs
- After allowance for quota share arrangements, the combined cover for catastrophes results in the company having a maximum event retention of $95 million
- Chief Financial Officer Michelle McPherson says the reinsurance program is an intrinsic part of IAG’s capital management strategy
- Shares are trading 0.23 per cent higher this morning at $4.40 each
Insurance Australia (IAG) has finalised its catastrophe insurance program for 2022, maintaining its gross reinsurance protection cover at up to $10 billion, the same level as 2021.
Catastrophe reinsurance is purchased by insurance companies to reduce risk if a catastrophic event occurs.
IAG will retain the first $250 million of each loss. If a second or third event occurs then the company has drop-down coverage of $50 million, reducing the cost to $200 million.
Three prepaid reinstatements have been secured for the lower layer of the main program.
The program has been placed to the extent of 67.5 per cent to reflect IAG’s cumulative whole-of-account quota share arrangements.
About 60 per cent of the gross main catastrophe program is protected by multi-year coverage.
The company says the credit quality of the program is strong, with 90 per cent placed with entities rated A+ or higher.
The program also includes an aggregate sideways cover until June 30 this year. This provides $350 million of protection in excess of $90 million, following an estimated $310 million erosion of the $400 million deductible during the six months to 31 December 2021 (pre-quota share).
After allowance for the quota share arrangements, the combined cover for catastrophes results in the company having maximum event retention of $95 million.
Chief Financial Officer Michelle McPherson said the reinsurance program is an intrinsic part of IAG’s capital management strategy
“The structure of the new program is similar to that of prior years, and we received strong support from our reinsurance partners with whom we have long-term relationships,” she said.
Shares are trading 0.23 per cent higher this morning at $4.40 each at 11.30 am AEDT.
