Cut in catastrophe reinsurance
03 Jan 2018
IAG said on Wednesday it has finalized its catastrophe reinsurance program for 2018, cutting its catastrophe coverage on the back of quota share agreements with three reinsurers.
The new program means IAG's gross main cover for a so-called "first catastrophe event" drops by AU$970 million ($759.32 million) to AU$5.23 billion.
However, the insurer will only pay up to AU$169 million in losses for such an event, instead of the AU$200 million losses it paid out previously.
IAG said the amount placed under the program was 67.5%, compared with 80% for the prior year, due to new quota share agreements which came into effect on Jan. 1.
On Dec. 8, 2017, IAG said it would share 12.5% of its premiums and costs with Munich Reinsurance Co., Swiss Re Ltd. and Hannover Re S.E. to help release capital.
The 2018 program covers IAG's operations in Australia, New Zealand, Malaysia, Thailand, Vietnam, and Indonesia; and excludes its joint-venture interest in India which has its own reinsurance arrangements.
During the renewal process, the insurer also reported “modest upwards pressure” on like-for-like reinsurance rates, with the overall expense outcome in line with the associated assumption in its FY18 guidance.