IAG receives over 2800 bushfire claims since September

IAG expects to pay out about $400m in the first half of the year, as bushfires mean more uncertainty ahead.

A home destroyed by bushfires near Bilpin in NSW. Picture: Getty Images

Insurance Australia Group is anticipating almost a quarter of its natural perils allowance for the 2020 financial year will be paid out in bushfire-related claims incurred in the first half of the year.

Perils estimates from IAG indicate a net cost of $160m for bushfire-related claims dating from September -- when blazes began to devastate the nation – to December 31.

By the close of business on Thursday, Australia’s largest insurance underwriter had received over 2800 bushfire-related claims, with 1500 lodged since December 1.

The company anticipates its net natural perils claims costs for the first half of the financial year will approximate $400m post-quota share, compared to an annual natural perils allowance of $641m.

IAG has also increased its catastrophe reinsurance program to cover losses up to $10bn for the 2020 calendar year, from $9bn in 2019, giving it more coverage in the event of a single major catastrophe.

IAG Australia division chief executive Mark Milliner said uncertainty around the bushfire crisis and the expected deterioration of conditions this weekend will likely further impact the number of claims.

“Our priority is to help customers affected by these terrible events as soon as possible, while minimising the personal risk to those facing these ongoing catastrophes,” he said.

Mr Milliner said the natural disaster claims total for the first half of the year had been exacerbated by drought and extreme weather events, such as significant hailstorms on Queensland’s Sunshine Coast.

At 12.04pm, IAG shares were trading up 1 per cent, at $7.66 each.

IAG’s chief financial officer Nick Hawkins said the reinsurance protection program was “integral” to its capital platform.

“While the structure of the 2020 program is similar to prior years, we continue to expand our catastrophe reinsurance cover in a cost-effective manner, while providing additional protection above our modelled exposure,” he said.

IAG has also increased its multi-year arrangements with some of its largest reinsurance counterparties.

“Combined with our existing quota share arrangements, this means around 70 per cent of our gross main catastrophe program for calendar 2020 is protected by multi-year coverage, providing greater certainty of future reinsurance cover,” Mr Hawkins said.