Insurance Australia Group Ltd. has increased its gross reinsurance protection to up to A$10 billion for its 2020 catastrophe reinsurance program.
IAG will retain the first A$250 million of each loss, the same as it did last year. The program also includes three prepaid reinstatements secured for the lower layer as it did in 2019. It also includes a second event drop-down cover reducing the cost of such an event to A$200 million and an aggregate sideways cover that provides protection of A$425 million excess of A$450 million.
The company continues to have a cumulative whole-of-account quota share position of 32.5% which comprises a ten-year 20% agreement with Berkshire Hathaway Inc. as well as combined 12.5% agreements with Munich Re Co., Swiss Re AG and Hannover Re.
The combination of all catastrophe covers at Jan. 1 results in IAG having maximum event retentions of A$169 million in the first event, A$135 million in the second event and A$17 million in the third event. IAG has a reinsurance cover for retained natural perils which provides post-quota share protection of A$101 million in excess of A$675 million for the 12 months that end on June 30.
The company said it will use its 2019 reinsurance program to cover losses from the ongoing bushfires across Australia, but the duration will depend on individual event inception dates and subsequent weather patterns.
Overall bushfire events are expected to contribute more than A$160 million of net claim costs in the first half of 2020, post-quota share. IAG received 2,800 bushfire-related claims between September 2019 and Jan. 2.
IAG estimates natural peril claims for the six months ending Dec. 31, 2019, to be approximately A$400 million post-quota share, rising above the allowance of A$320 million.