In reporting its results this morning, Australian primary insurance group IAG has revealed a recovery made under its calendar year aggregate reinsurance, as A$90 million flowed back to the company due to severe storm events.IAG had already fully eroded its deductible for the calendar year catastrophe aggregate reinsurance protection it had in place for 2020 by the end of June.That meant additional qualifying catastrophe events through the second-half of the year all drove recoveries, helping to support the insurers earnings through 2020.Overall, IAG has reported that its natural perils costs came out below budget by A$39m for the first-half of its financial year, but helped by these aggregate reinsurance recoveries.

The A$90 million of recoveries came largely after the second-half of 2020 impacts of A$290 million of catastrophe losses, led by the East Coast Low in July and severe storm events that affected New South Wales and Queensland in late October 2020.Having eroded the full deductible already, each catastrophe event in the second-half of calendar year 2020 had its losses capped by the aggregate reinsurance layer, which did its job for IAG in 2020.That was in a period when IAG said, “reflects relatively benign natural perils experience in the latter stages of the 2020 calendar year.” Which suggests in a more normal year IAG would have made an even larger reinsurance recovery.

Of course, the insurer has now adjusted the timing of its aggregate reinsurance, choosing to run it alongside its financial year and having .That means the typical summer storm events Australia experiences could be the ones that erode the deductible in years to come, while the winter events are the ones that result in recoveries, flipping things around from 2020., to provide it with the same $10 billion level of occurrence coverage as it had for the prior year.———————————————————————.

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