IAG unveils catastrophe reinsurance program for 2023

“Global reinsurance has become more challenging over the past year due to the impact of capital markets and Australian and international natural peril events. However, IAG continues to have strong support from our long-term reinsurance partners,” she said.

2023 catastrophe reinsurance program

Together with IAG’s WAQS requirements that apply to 32.5% of natural perils, the insurance giant’s catastrophe reinsurance program for the 2023 financial year (FY23) provides:

A main catastrophe cover for two events up to $10 billion, with a retention of $338 million (67.5% of $500 million);
A further dropdown cover of $150 million, reducing IAG’s retention on the two events to $236 million (67.5% of $350 million), with an additional premium payable if the dropdown cover is utilised on a first event; and
Third and fourth event covers of $250 million excess of $250 million.

For the rest of FY23, IAG’s catastrophe reinsurance program includes a dropdown cover of $100 million for third and fourth events, reducing the retention to $101 million (67.5% of $150 million) and aggregate cover of $350 million in excess of $500 million, with qualifying events capped at $200 million in excess of $50 million per event.

“After allowance for the WAQS arrangements, the combination of all catastrophe covers on January 1, 2023, results in IAG having a maximum first event retention of $236 million (July 01, 2022: $135 million),” McPherson said. “The total non-quota share reinsurance expense for FY23 has increased as expected and is currently anticipated to be in the range of $790 million to $820 million (FY22: $659 million).

“The overall credit quality of the 2023 program is strong, with over 90% placed with entities rated A+ or higher, which is in line with 2022.”

WAQS agreements

IAG agreed to renew arrangements with WAQS partners Munich Re and Swiss Re, representing 10% of the 12.5% account program due to expire on June 30, 2023. The new agreements are effective January 1, 2023, and have a five-year term.

McPherson said the leading global reinsurers’ decision to renew their arrangements with IAG reflected their confidence in the insurance giant’s franchise and its financial outlook’s strength.

“In an environment of constrained reinsurance capacity, the renewed agreements provide IAG with materially consistent financial outcomes and support our 15% to 17% medium-term reported margin target,” she said.

Renewal discussions in respect of the remaining 2.5% due to expire on June 30, 2023, are expected to be completed over the coming months.