Added with additional layers of protection, IAG said its own costs in a catastrophe would be lowered to $236 million. It also acquired specific cover for a second event in NZ, where it is the No. 1 insurer, of an extra $100 million. That came after North Island flooding last year squeezed IAG’s earnings.
The $236 million cost figure matches cover a year earlier, despite fears IAG expressed in June and August last year that it would be hard to obtain reinsurance at that same level.
Similar to a consumer paying excess before claiming on their motor policy, insurers face equivalent upfront payments for their reinsurance when disaster strikes, and wearing a greater upfront payment can reduce the reinsurance price.
Reinsurance prices had been spiking – midway through last year, one specialised type of reinsurance became so costly that insurers Suncorp and Youi decided it made more financial sense to drop that “aggregate” form of reinsurance protection.
IAG, whose other brands include CGU and WFI Insurance, also on Thursday revealed wild storms and flooding from last month had triggered 17,000 claims. About 500 stemmed from Cyclone Jasper in North Queensland and another 9000 came from deadly storms around Christmas Day.
The company was still calculating the December damage cost. But it said natural perils costs were “tracking below” its internal budgeted allowance for such disasters, with its forecast for the full year at $1.147 billion.
The rash of wild weather late in the year has dented the El Nino effect, in which drier weather tends to lead to fewer insurance claims.
Still, RACQ chief executive David Carter on Thursday said of storm claims, less than 10 per cent was severe damage to homes, meaning a potentially lower damage bill.
“There’s a high number [of claims], but there’s a lot of food spoilage,” he told The Australian Financial Review. He cautioned damage expectations could change as people returned to homes where communications have been cut off.
RACQ has chalked up almost 7800 claims from storms and hail last month, and Cyclone Jasper.
Its own reinsurance kicks in at $75 million for a disaster, but Mr Carter did not expect any of the events to trigger that damage level.
The Insurance Council of Australia on Thursday said almost 41,300 claims industry-wide had been made across Queensland, NSW, and Victoria for storms between Christmas and the New Year.
Insurer Auto and General, behind brands including Budget Direct, on Thursday said it had about 7000 claims, including from Cyclone Jasper, hail in the Hunter Valley and Gympie, and the Gold Coast storms. The estimated cost was $90 million, it said.
Australia’s other major insurer of homes and cars, Suncorp, said on Wednesday it had notched 19,000 claims since November.
