Fast Facts on IAG’s 2017 Catastrophe Reinsurance Program


Insurance Australia Group (IAG) has finalised its catastrophe reinsurance program for the 2017 calendar year, which provides gross reinsurance protection of up to USD7bn.

Here are fast facts about IAG’s 2017 catastrophe reinsurance program:

IAG’s integrated catastrophe reinsurance program for this year comprises two main components

A main catastrophe cover for losses up to $7 billion, including one prepaid reinstatement.
IAG retains the first $250 million of each loss ($200 million post-quota share), with three
prepaid reinstatements secured for the lower layer of the main program ($200 million excess of $200 million post-quota share).

An increased aggregate sideways cover which reduces the cost of a second event to $125 million ($100 million post-quota share) and a subsequent event to $25 million ($20 million post-quota share). The aggregate provides protection of $475 million excess of $325 million ($380 million excess of $260 million post-quota share), with qualifying events capped at a maximum contribution of $225 million excess of $25 million per event ($180 million excess of $20 million post-quota share).

IAG’s 2017 catastrophe reinsurance program contains an increased multiyear component

The program involves several counterparts and covers all territories in which IAG operates, with the exception of its joint venture interest in India which has its own reinsurance arrangements.

The catastrophe reinsurance covers AIG’s operations in Australia, New Zealand, Thailand, Malaysia, Vietnam and Indonesia. The gross protection is consistent with 2016, reflecting a relatively stable overall aggregate exposure, where growth in short tail personal lines has been offset by reduced commercial portfolios, in both Australia and New Zealand.

The credit quality of the program is strong

In a disclosure to the Australian Securities Exchange, AIG said the overall credit quality of the 2017 program is strong, with over 92% (2016: 88.5%) placed with entities rated A+ or better.

In addition, IAG has a separate natural perils cover of $96 million in excess of $680 million (post-quota share), which runs in line with the financial year ending 30 June 2017. –