IAG has finalized its catastrophe reinsurance program for this calendar year, which provides increased gross reinsurance protection of up to $9bn.
Consistent with last year, the program has been placed to the extent of 67.5% to reflect the cumulative whole-of-account quota share position of 32.5%. This comprises the original 20% quota share agreement with Berkshire Hathaway, which commenced 1 July 2015, and the combined 12.5% quota share agreements with Munich Re, Swiss Re and Hannover Re which came into force from last January.
IAG’s integrated catastrophe reinsurance program for this calendar year comprises two main components:
A main catastrophe cover for losses up to A$9bn ($6.34bn), including one prepaid reinstatement.
IAG retains the first A$250m ($176.11m) of each loss (A$169m ($119.05m) post-quota share), with three prepaid reinstatements secured for the lower layer of the main program (A$169m ($119.05m) excess of $169m ($119.05m) post-quota share), and
An aggregate sideways cover which reduces the cost of a second event to A$175m ($123.27m) (A$118m ($83.12m) post-quota share) and a subsequent event to A$25m ($17.61m) (A$17m ($11.98m) post-quota share).
The aggregate provides protection of $475m ($334.6m) excess of A$375m ($264.16m) (A$321m ($226.12m) excess of A$253m ($178.22m) post-quota share), with qualifying events capped at a maximum contribution of A$225m ($158.5m) excess of A$25m ($17.61m) per event (A$152m ($107.07m) excess of A$17m ($11.98m) post-quota share).
IAG has increased the limit of its main catastrophe cover to $9bn ($6.34bn) to provide additional protection above modelled exposure. Compared to last year, underlying aggregate exposure is expected to show a modest increase in Australia and growth of approximately 5% in New Zealand.
The overall credit quality of the 2019 program is strong, with over 92% placed with entities rated A+ or higher.
The combination of all catastrophe covers in place at 1 January 2019 results in post-quota share first event retentions of A$169m ($119.05m) for Australia and NZ$169m ($113.08m) for New Zealand.
IAG experienced relatively flat reinsurance rates during the renewal process, with the overall expense outcome in line with the associated assumption in its FY19 reported margin guidance.
Source: Company Press Release