Australian primary insurance group IAG highlighted the potential impacts of recent severe storms and flooding in parts of Victoria, saying that the loss burden is expected to take its net natural peril claims costs over budget and could trigger its stop loss reinsurance cover.
As we explained earlier this week, the severe storms and flooding resulting from them could drive some reinsurance recoveries for the major Australian primary carriers.
As of today, the Insurance Council of Australia (ICA) has reported that insurers have received 15,700 claims from the storms and flooding event, with an estimated cost of $144 million, a figure certain to rise much further.
Suncorp was the first to report on these storm-related impacts, saying that its reinsurance would limit exposure to the catastrophe event.
Suncorp said that, despite going above its catastrophe budget, its “comprehensive reinsurance program” and remaining coverage in place, means that “the maximum potential loss from this event is $50 million.”
Now IAG has said that, after these storms and floods and based on current estimates, its fiscal year 2021 net natural peril claims costs are likely to range from around $720 million to $743 million, well above its perils allowance of $658 million and above previous guidance of $660 million to $700 million of claims.
IAG said it had received 4,300 claims from these storms and floods in Victoria as of Tuesday this week, which are largely from property damage, with the claims figure expected to rise further as people return to homes and businesses.
The top-end, $743 million figure, represents the attachment or trigger point for the stop-loss reinsurance cover for retained catastrophe claims that IAG had purchased for this fiscal year.
Which suggests that there is a strong chance of claims costs for the fiscal year triggering this layer of protection and driving some costs to its reinsurance partners.
The stop-loss provides $100 million of reinsurance cover above $1.1 billion, or $68 million of cover above $743 million after its quota-share reinsurance is taken into account.
The quota-share reinsurance partners of these large Australian insurers are destined to assist in paying claims from the storms and floods, while the losses will also likely erode further into their aggregate cover deductibles.