December 9, 2023

Australian junior insurance giant Insurance Australia Group (IAG) has announced for the second consecutive year the renewal of its catastrophe reinsurance package on tighter terms, offering less protection and higher attachment points.

IAG’s experience in sticking to overall reinsurance underwriting is indicative of reinsurance market conditions where reinsurers are shying away from frequency and secondary risk event losses.

Recall that IAG renewed its $10 billion catastrophe reinsurance tower through 2023 when it renewed it in January, with a 75% increase in its maximum first-event retention rate, which the company said was in response to inflation and the global reinsurance market situation.

Now, as is customary for insurers, IAG is renewing its general reinsurance and appears to be experiencing similar market conditions.

A year ago, IAG’s general reinsurance was renewed, providing it with $350 million of coverage on top of an additional $500 million point.

At renewal in mid-2023, the total reinsurance has been updated to provide IAG with $250 million of coverage, over $600 million of add-on points, thus providing $100 million less under more onerous conditions at the higher add-on level of $100 million Dollar insurance, appears.

For total reinsurance from 2023 to 2024, IAG again capped losses on individual qualifying events at $200 million for each event exceeding $50 million, while purchasing third and fourth event coverage at more than 2 $150 million in protection for $100 million events (last year, $100 million for events over $150 million).

Total reinsurance has taken up 67.5%, reflecting IAG’s overall account quota share arrangement, which is typical for insurers.

Remember, just earlier this week, IAG’s Australian insurance giant, Suncorp, renewed its catastrophe reinsurance and dropped total coverage entirely in the renewal.

This, combined with reduced coverage and worse terms received by IAG, clearly shows the severity of the reinsurance market environment.

IAG has also renewed its 2.5% overall account quota share reinsurance arrangement with Hannover Re, which was due to expire on June 30, 2023. The new quota share arrangement will come into effect on 1 July 2023 for a period of five years.

Michelle McPherson, IAG Chief Financial Officer, commented: “IAG has now renewed all four of its whole account quota share reinsurance arrangements with the world’s leading reinsurers. Seven years provides certainty.

“Quota share arrangements have been updated to deliver substantially consistent financial outcomes and are especially valuable in a challenging reinsurance market. These arrangements cover 32.5% of total claims costs, meaning we only need to buy 67.5% of the disaster plan.”

Of course, in recent years, IAG has benefited from its total reinsurance, but as the add-on increases, the likelihood of attaching the add-on decreases in any given year, thus reducing the usefulness of this insurance, while the cost of underwriting also rises.

Including its quota share arrangement, the IAG currently has a maximum event reserve of $169 million for the first and second events.

iag Reinsurance Renewal Program


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