IAG caps natural perils costs at $1.3b

It also said it is on track to report FY24 profit and margin at the upper end of the guidance ranges.

Insurance Australia Group (IAG) has secured reinsurance protection for the next five years to manage natural perils volatility and obtained adverse development protection for its $1.68b (AU$2.5b) long-tail reserves. 

Two strategic agreements with Berkshire Hathaway and Canada Life Reinsurance enhance financial stability, providing up to $456m (AU$680m) annually in natural perils protection. 

An adverse development cover with Enstar reduces long-tail risks, and this reduced volatility is expected to deliver a capital benefit of around $234.5m (AU$350m).

CEO Nick Hawkins emphasised the importance of these agreements in creating a stronger, more resilient IAG, providing greater certainty over natural perils costs, stabilising earnings, and reducing capital requirements. 

The reinsurance agreements ensure protection against extreme weather events, capping FY 2025 net natural perils costs at $860.61m (AU$1.283b) in most scenarios.

Additionally, IAG confirmed it is on track to report FY 2024 insurance profit and margin at the upper end of the guidance ranges, with an expected profit between $804m (AU$1.2b) to $971.5m (AU$1.45b) and a margin of 13.5% to 15.5%. 

The new protections are projected to decrease IAG’s prescribed capital amount by around $234.5m (AU$350m), subject to regulatory approval.

($1.00 = AU$1.50)