Insurance Australia Group (IAG) has received in excess of 24,000 claims following severe weather in Victoria. The company now expects the related claim cost to reach its maximum event retention (MER) of $135m under its reinsurance cover.

As a result of the event, natural peril costs are estimated to exceed the budgeted $184m allowance for the second half by $105m. In addition, the company is refining its FY10 insurance margin guidance to 10.5% to 12.0%, from 11.5% to 13.0%.

According to IAG, the FY10 insurance margin guidance is subject to losses from natural perils being within the revised natural perils forecast for the second half; no material movement in foreign exchange rates; and no material movement in investment markets.

Michael Wilkins, managing director and CEO of IAG, said: “Our businesses, which distribute insurance predominantly under the RACV1 and CGU brands in Victoria, continue to work around the clock to assist customers as quickly as possible. I am very proud of the response of our teams to date.

“We now believe the scale of this event means we will make claims on our catastrophe reinsurance covers, which will cap the Group’s total pre-tax loss at $135m. The Group’s MER for any subsequent event in calendar year 2010 now reduces to $75m.”