IAG set to pay out up to $83m after Victorian storms

IAG and rival insurer Suncorp will exceed their perils payout guidance for the year following damaging storms in Victoria.

A tree down on a house and vehicle at Kyneton in Victoria. Picture: Alex Coppel.

Insurance Australia Group, the nation’s largest insurer, is set to pay out up to $83m in additional perils claims in the aftermath of last week’s severe storms and floods in Victoria.

In a statement to the ASX on Wednesday IAG said as of June 15 it had received around 4300 claims in relation to the storms, predominantly for property damage.

That number is expected to rise as evacuated residents return to their damaged homes, the insurer said.

As a result of the storm damage as well as other claims, IAG’s net natural peril claim costs are set to rise from approximately $660m at the end of May to between $720m and $743m by the end of the financial year.

It means the claims paid out will exceed the groups $658m perils allowance for the period and the $660m-$700m guidance range provided in the aftermath of heavy flooding that hit northern NSW and south east Queensland in March.

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

The market reacted positively to the news, with IAG shares trading at $5.20, up 1.66 per cent, at lunch.

IAG executive general manager for direct claims Luke Gallagher said customers should take care when inspect their properties, and emergency accommodation could be arranged for those who need it.

“We have assessors and builders on the ground ready to ensure our customers’ properties are safe and secure,” he said. “We will contact those impacted to book in property assessments, so repairs can begin as soon as possible.

“We can also arrange emergency accommodation and provide immediate financial assistance for customers in need.”

IAG’s update comes after the nation’s second-largest insurer, Suncorp, said it had received around 3750 claims relating to the storms as of June 14, also predominantly concerning property damage.

Suncorp did not put a dollar figure on the claims but said as of May 31 it had already exceeded its full year $950m natural hazard allowance by $5m.

But the insurer said that due to its reinsurance policies, the maximum loss from the Victorian storms was capped at $50m.

Suncorp Group CEO Steve Johnston said its emergency team was already on the ground at Traralgon in Victoria’s Gippsland region, and that it was organising temporary accommodation and cash payments for impacted customers.

He also called for more to be done to protect homes from flooding in the future.

“What we’re seeing in Victoria should again act as a reminder to the devastation which can be caused by severe weather events,” Mr Johnston said.

“More needs to be done to better protect homes in flood-prone regions across the country, including improved town planning and government investment in mitigation infrastructure.”

Suncorp shares rose 1.73 per cent to $11.44 as of Wednesday afternoon.

Credit Suisse analysts Doron Kur and Marco Vissers said the potential claims payouts did not modify their earnings forecast for the insurer, but downgraded the stock to neutral based on its strong share price growth in recent months.

“Following a strong run in share price – 11 per cent since March – we now view Suncorp as fairly priced at 15.8 times FY22 estimated earnings per share,” they said.