IAG renews A$10bn cat reinsurance tower with modest cost increase

Australian insurer  IAG has seen a “mid-single digit” increase in the cost of its catastrophe reinsurance programme, which has been renewed for the 2022 calendar year, maintaining the top of its reinsurance tower at up to A$10 billion ($7.2 billion), the same level as 2021.

IAG said the new programme has received “strong support from reinsurance partners” with whom it has long-term relationships.

The programme has been placed to the extent of 67.5% to reflect IAG’s cumulative whole-of-account quota share arrangements.

The cost of the program has increased by mid-single digits, in line with the assumptions incorporated into IAG’s internal planning processes.

Around 60% of the gross main catastrophe program for 2022 is protected by multi-year coverage, providing certainty of future reinsurance cover. It also includes an aggregate sideways cover for the 12-month period to 30 June 2022, which provides A$350 million of protection in excess of A$90 million, following an estimated A$310 million erosion of the A$400 million deductible during the six months to 31 December 2021 (pre-quota share).

After allowance for the quota share arrangements, the combination of all catastrophe covers at January 1, 2022 results in IAG having a maximum event retention of A$95 million.

The overall credit quality of the 2022 programme is “strong”, according to IAG, with over 90% placed with entities rated A+ or higher, an increase compared to 2021.

IAG’s chief financial officer Michelle McPherson (pictured) said: “Our catastrophe reinsurance program remains 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.”

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