Reinsurance News

IAG’s FY21 nat cat claims to exceed allowance on rainfall / flooding

26th March 2021 - Author: Luke Gallin

Australian insurer IAG has announced estimated FY 2021 net natural perils claim costs of between AUD 660 million to AUD 700 million compared to its perils allowance of AUD 658 million, as claims continue to come in for the widespread flooding in New South Wales (NSW) and Queensland.

Earlier this month, the Insurance Council of Australia (ICA) declared a catastrophe for large parts of NSW, following the evacuation of around 18,000 residents in light of widespread and intense rainfall which began on March 16th.

The days of torrential downpours caused rivers and dams to overflow around Sydney and in south-east Queensland, and heavy rain continued to fall over parts of NSW and Queensland this week.

The latest data from the ICA notes 25,681 insurance claims to date, with an estimated cost of AUD 385 million.

By 4pm on March 25th, IAG says it had received some 8,000 claims, mostly for property damage, and that it expects this to rise further in the days ahead.

Based on exposure, claims lodged to date and experience with previous similar extreme weather events, the insurer estimates the net cost of this event at roughly AUD 200 million, or AUD 135 million post-quota share. The total cost will be capped at AUD 169 million, which is the maximum event retention for a first event under IAG’s 2021 catastrophe reinsurance programme.

Back in February, IAG reported a half-year loss of AUD 460 million despite recovering AUD 90 million of catastrophe costs under its aggregate reinsurance cover. Like many carriers, results were impacted by claims related to the COVID-19 pandemic.

For the eight months to February 28th, 2021, IAG’s net natural perils claim costs totalled approximately AUD 375 million, driven by a fairly benign period of activity during this financial year prior to the event in March.

Taking into account the March event and also seasonally lower perils costs that typically occur in the June quarter, IAG has pegged FY21 net natural perils claim costs at between AUD 660 million and AUD 700 million, which is above its allowance of AUD 658 million for the period.

This range, notes IAG, assumes an estimated AUD 150 million to AUD 190 million for further peril events in the months of March to June 2021.

As we’ve discussed previously, the insurer has full-year stop-loss protection for retained natural perils claim costs, which provides it with AUD 100 million of protection in excess of AUD 1.1 billion, or AUD 68 million in excess of AUD 743 million post-quota share.

The company’s full-year 2021 aggregate reinsurance protection provides AUD 350 million in coverage excess of AUD 400 million, pre-quota share. IAG explains that qualifying events are capped at AUD 200 million in excess of AUD 50 million per event, effective January 1st, 2021.

The heavy rain and flooding in March, says IAG, is expected to erode AUD 150 million of the AUD 400 million deductible under its aggregate programme.

IAG Chief Executive Officer (CEO) and Managing Director, Nick Hawkins, commented: “We are working hard providing support to customers and communities affected by flooding.

“Our teams are on the ground supporting customers in the worst impacted areas of the NSW Mid North Coast, Western Sydney and south east QLD, assessing the damage to our customers’ homes, ensuring their properties are safe and arranging temporary accommodation for those who need it.

“Our dedicated major events team is managing claims from this event and we have increased our call centre capacity to help affected customers lodge claims as soon as possible. All our NRMA Insurance branches in the impacted areas are open to support customers and we have deployed a claims team to the NRMA Port Macquarie branch to provide face-to-face support for those lodging claims.”

Global insurance and reinsurance broker Aon has commented on the event in a recent catastrophe report. The broker notes that based on at least 22,100 claims, insured losses are expected to reach AUD 331 million (USD 251 million).

According to Aon, the overall economic loss is expected to show a notable protection gap (disparity between economic and insured losses post-event).

Australian insurer Suncorp has also provided an update on its claims experience from the March event. As of 4pm March 25th, Suncorp had received more than 5,400 claims across NSW, Queensland and Victoria, of which roughly 80% are in NSW. And, in line with reports from IAG, Suncorp notes that 85% of total claims relate to property damage.

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