IAG, Suncorp release BI provisions after High Court decision
IAG, Suncorp release BI provisions after High Court decision
17 October 2022
IAG and Suncorp have reduced their provisions for business interruption claims triggered by the pandemic after the High Court last week rejected appeal applications related to the industry’s second test case.
IAG reduced its provision to $615 million from $975 million at June 30 and said it intended to use the released funds to buy back up to $350 million of its shares.
“The revised BI provision is based on IAG’s actuarial modelling and includes a significant risk margin,” the company said in a stock exchange statement this morning.
“As further information becomes available, IAG will review the provision and make adjustments accordingly. This may occur in phases over a period of time.”
IAG says it will continue to provide updates in relation to the test case to customers who have lodged business interruption claims and will also contact those with applicable cover to advise on the final outcome and how to lodge a claim.
Suncorp’s provision for potential losses due to covid-related business interruption claims was $179 million as of June 30.
The majority of that would now be released with the updated provision and further details to be provided as part of the preparation of the financial year first-half result, it says.
QBE in January 2021 announced a $US185 million ($298 million) risk margin strengthening with respect to potential Australian business interruption claims.
Citi Analyst Nigel Pittaway says in a research note following the court decision that the firm believes QBE has around US$160 million ($257 million) in risk margins with respect to potential local business interruption claims and a significant portion of this may be available for release, depending on some offset factors.
Mr Pittaway says the High Court decision on the whole is positive for the locally listed insurers, although one consequence of all matters being rejected is that JobKeeper payments can’t be taken into account when calculating any payment due on a responding policy.
