Australian insurance giant IAG has revealed that it anticipates at least a $114 million reinsurance recovery to help it pay claims from the recent severe flooding that struck the New Zealand city of Auckland.
As we reported earlier this week, both IAG and fellow Australian insurer Suncorp had warned they were expecting heavy losses from the severe flooding in the Auckland region of New Zealand.
Auckland received 75% of its typical summer rainfall in just 15 hours, driving severe flash flooding and widespread damage to properties and vehicles, with further impacts this week from additional heavy rain.
IAG said earlier this week that it had received more than 5,000 claims across its AMI State and NZI insurer brands.
These claims could drive it to review its catastrophe budget for the fiscal year, while the company also said that thanks to its quota share and other reinsurance programs, IAG’s maximum retention from the flood event in Auckland would be $236 million.
Now, IAG has updated the stock market, saying that the Auckland floods will drive a reinsurance recovery and a full retention loss for the carrier.
As of this morning, IAG has received over 15,000 claims from the Auckland flooding.
The company disclosed that its gross losses from the flooding in New Zealand are expected to reach more than $350 million.
As a result, IAG anticipates a full retention loss event, at $236 million, which means at least $114 million will be recovered from the insurer’s reinsurance arrangements.
As a result, IAG’s maximum retention for a second event during the 2023 financial year drops to $192 million, thanks to its drop down and aggregate reinsurance arrangements.
There will also be an additional reinstatement premium payable for this second drop down reinsurance cover, IAG said.
IAG’s natural peril claims are now estimated to have reached $524 million for the first-half of its fiscal year, which runs mid-year to mid-year.
That’s $70 million above the catastrophe budget for the period, as a result of which IAG said it will increase its full-year forecast for catastrophe losses by the $236 million retention seen with the Auckland floods, taking the fiscal year cat budget to $1.145 billion.
The New Zealand Insurance Council said it estimates around 20,000 insurance claims have now been filed after the flooding, across house, contents, motor and commercial insurance, as of this morning.
With IAG having disclosed over 15,000 claims received, it appears the Council’s estimate is likely short on the real total from this severe flood event.
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