Australian insurer IAG has revealed that losses as a result of hailstorms which hit parts of Melbourne, Canberra, and Sydney earlier this month, will see it make a claim under its 2020 main catastrophe reinsurance program.
The insurer’s calendar year 2020 main cat reinsurance program provides it with per-occurrence coverage for the recent hailstorms. The fact that IAG is set to claim on its program means that the gross loss from this event for IAG alone is going to be above AUD 250 million.
Under its main program, IAG retains the first AUD 250 million of each loss, post its 32.5% quota share arrangements, which, when taken into account results in the insurer having a maximum event retention of $169 million for a first event, AUD 135 million for a second event, and AUD 17 million for a third event.
The company’s cumulative whole-of-account quota share position is comprised of a 10-year 20% agreement with Berkshire Hathaway, which commenced 1 July 2015, as well as combined 12.5% agreements with Munich Re, Swiss Re and Hannover Re.
It’s unclear exactly how impactful the event has been for IAG, but based on the most recent data from the Insurance Council of Australia (ICA), which puts the insured loss at AUD 407 million (as at Jan 22nd), IAG’s share of the market loss is fairly significant.
IAG states that based on projected claim volumes and the severity of related damage, it is anticipated this event will result in a pre-tax cost of AUD 169 million (post-quota share), which is in line with its maximum first event retention. The firm adds that it does not expect that this event will be large enough to require it to acquire any reinsurance reinstatement as part of the calendar 2020 program.
The insurer has an extensive catastrophe reinsurance program in place which features a per-occurrence catastrophe cover for losses up to $10 billion, so anything above the $169 million cost to IAG from this event will be assumed by its main catastrophe programme.
The firm also has a layer of aggregate sideways reinsurance, which provides it with AUD 425 million of coverage excess of AUD 450 million, with qualifying events capped at a maximum contribution of AUD 225 million excess of AUD 25 million per event. However, the hailstorms aren’t going to have any impact here as the gross loss is above the AUD 225 million.
As of yesterday, IAG had received more than 28,000 claims resulting from the hailstorms, and it is expected that number will rise in the coming days as claims continue to filter through.
“We are doing all we can to help our impacted customers get back on their feet as swiftly as possible. We are scaling-up our support for customers in the affected areas and have increased our call centre capacity to help those affected lodge claims easily. This follows on from increasing staff levels to respond to the devastating bushfire season.
“We have also allocated additional staff to the claims and repair management teams and our online claim lodgement facility is helping with the rapid assessment of claims. We have set up seven specialist repair centres across Melbourne, Canberra and Sydney to help assess and repair hail-damaged vehicles,” said Mark Milliner, IAG Australian Division Chief Executive Officer (CEO).
IAG announced the completion of its main catastrophe reinsurance program at the start of January, at a larger size of AUD 10 billion. At the same time, the firm said that it had called on its 2019 reinsurance program to cover losses from the ongoing bushfires in Australia, which has now officially become the costliest bushfire event on record.
