March flooding in NSW and Qld to cost IAG $135m and counting

IAG says about 8000 claims have been made in relation to recent flooding and the end total could push it over its annual allowance.

Insurance Australia Group’s natural peril claims relating to flooding in NSW and southeast Queensland have risen to 8000, with the ultimate cost of the floods threatening to exceed the company’s yearly allowance.

Australia’s third-largest insurer on Friday said it had received claims worth about $135m, mainly related to property damage.

CEO and managing director Nick Hawkins said the company had deployed support teams to affected areas.

“We are working hard providing support to customers and communities affected by flooding. “Our teams are on the ground supporting customers in the worst-impacted areas of the NSW mid-north coast, western Sydney and southeast Queensland, assessing the damage to our customers’ homes, ensuring their properties are safe and arranging temporary accommodation for those who need it,” he said.

Mr Hawkins said the company had expanded call centre capacity, opened its NRMA branches in impacted areas to customers, and deployed a claims team on the ground in Port Macquarie in northern NSW. “Our dedicated major events team is managing claims from this event and we have increased our call centre capacity to help affected customers lodge claims as soon as possible,” he said.

Australia’s third-largest insurer said the approximately 8000 claims received by 4pm on Thursday morning were mainly related to property damage. Picture: NCA NewsWire / Dylan Coker

“All our NRMA Insurance branches in the impacted areas are open to support customers and we have deployed a claims team to the NRMA Port Macquarie branch to provide face-to-face support for those lodging claims.”

IAG said the net cost of flood-related claims would be capped at $169m under its maximum event retention for the first major event under its 2021 catastrophe reinsurance program. In the eight months to February 28 net natural perils claim costs were about $375m due to “relatively benign perils activity”.

Taking the March floods into consideration, IAG estimates net natural perils claim costs at $660m to $700m for the financial year, compared to the perils allowance of $658m for the period.

The company said it had stop-loss protection for retained natural perils costs to the tune of $100m in excess of $1.1bn, or $68m in excess of $743m, post-quota share.

IAG’s financial year aggregate cover provides $350m of protection in excess of $400m, pre-quota share.

“Qualifying events are capped at $200m in excess of $50m per event effective from 1 January 2021,” the company said.

“Accordingly, the heavy rain and flooding event is expected to erode $150m of the $400m deductible.”

UBS analysts on Friday said if IAG experienced no further catastrophic events this year, the downside earnings risk would be 0-4 per cent, rising to 9-13 per cent if a large event was experienced in the June quarter.

IAG’s update comes after the peak body representing insurers — the Insurance Council of Australia — on Wednesday said more than 17,000 flood-related claims had been made, and estimated the net cost to be $254.2m.

On Wednesday Australia’s second-largest insurer Suncorp said it had received about 5400 claims and expected more.

Analysts at UBS said if Suncorp’s exposure to the flooding was like IAG’s, the “earnings risk would be minimal”, but a further large event would create a 5-8 per cent risk to earnings.

Shares in IAG closed at $4.79, down 0.21 per cent while Suncorp shares lifted 0.2 per cent to close at $9.92.

Originally published as March flooding in NSW and Qld to cost IAG $135m and counting