Severe storm and hail activity over the course of October has caused Australian primary insurer IAG to tap its reinsurance coverage and raise its expectation for full-year 2022 catastrophe losses.
IAG anticipates that the most recent storm event, which impacted South Australia and Victoria between 27th and 29th October and SE Queensland on 30th October, will result in a net cost of $169 million.
This figure is the maximum retention for a first loss under IAG’s catastrophe reinsurance program, the structure of which was detailed back in July.
As of 1st November, IAG had received approximately 14,000 claims from the recent October storm, but it expects this number to rise further over the coming days.
Following the South Australian hail and Victorian wind event, and other events that impacted the second half of October, IAG has increased its expectation for FY22 net natural perils claim costs to $1,045 million, compared to the previous assumption of $765 million.
This estimate includes $535 million for the first four months of FY22, made up of: $204 million for events incurred in the three-month period ending 30 September; $142 million for weather events across Eastern Australia in October; $169 million attributable to the South Australian and Victorian event; and $20 million of attritional events incurred in October.
Net natural perils claim costs for the first four months have exceeded IAG’s previous assumptions by approximately $280 million, and the revised FY22 expectation also includes approximately $510 million for perils events for the remainder of the financial year.
IAG estimates that the $270 million (post-quota share) deductible attached to the FY22 aggregate cover has been eroded by $209 million as a result of recent weather events.
Total protection available under the aggregate cover amounts to $236 million, post-quota share, and after allowing for quota share arrangements, the combination of all catastrophe covers at 1st November results in IAG having a maximum event retention of $95 million.
“We remain confident in IAG’s operational momentum in FY22, after the strong start in the first quarter that we reported at the recent AGM,” commented Nick Hawkins, Managing Director and CEO of IAG.
IAG reported a net loss of $427 million for the 12 month period ending June 30th 2021, after net perils during the FY21 period cost the company $742 million, which was $84 million above allowance.
