Australia:IAG gives update on its exposure to QLD & NSW floods

One of Australia's biggest non-life insurers, IAG, has estimated that it would have to bear the net cost of approximately A$135m [$103m] (A$200m pre-quota share), as a result of widespread flooding and storm damage associated with heavy rain that first hit southeastern Queensland and northern New South Wales this month.

The estimate is based on exposure, claims lodged to date and experience with previous similar events.

IAG, giving an update on natural perils claim costs, says that the net cost will be capped at A$169m, the Maximum Event Retention (MER) for a first event under the company's 2021 catastrophe reinsurance programme.

IAG’s net natural perils claim costs for the eight months to 28 February 2021 were approximately A$375m, following relatively benign perils activity this financial year before the March event.

Following the March event and taking into account seasonally lower perils costs that typically occur in the June quarter, IAG estimates net natural perils claim costs of approximately A$660m to A$700m for the financial year ending 30 June 2021 (FY21), compared to the perils allowance of A$658m for this period. This assumes an estimated A$150m to A$190m for further peril events in the months of March to June 2021.

IAG has FY21 stop-loss protection for retained natural perils claim costs. This provides protection of A$100m in excess of A$1.1bn (A$68m in excess of A$743m, post-quota share). IAG’s FY21 aggregate cover provides A$350m of protection in excess of A$400m (pre-quota share). Qualifying events are capped at A$200m in excess of A$50m per event effective from 1 January 2021. Accordingly, the heavy rain and flooding event is expected to erode $150m of the A$400m deductible.

IAG had received approximately 8,000 claims related to the Queensland and NSW floods by 4pm on 25 March 2021 and this is expected to rise further. The claims are predominantly for property damage.

Source: Asia Insurance Review