Insurance Australia Group cuts catastrophe reinsurance coverage

(Reuters) — Insurance Australia Group Ltd. said on Wednesday it has finalized its catastrophe reinsurance program for the 2018 calendar year, cutting its catastrophe coverage on a net of quota share basis.

The new program means IAG's gross main cover for a so-called "first catastrophe event" drops by AU$970 million ($759.32 million) to AU$5.23 billion.

However, the insurer will only pay up to AU$169 million in losses for such an event, instead of the AU$200 million losses it paid out previously.

IAG said the amount placed under the program was 67.5%, compared with 80% for the prior year, due to new quota share agreements which came into effect on Jan. 1.

On Dec. 8, 2017, one of Australia's biggest general insurers said it would share 12.5% of its premiums and costs with Munich Reinsurance Co., Swiss Re Ltd. and Hannover Re S.E. to help release capital.

The firm, whose entities sell insurance in Australia, New Zealand and countries in Southeast Asia, added it experienced "modest upwards pressure" on reinsurance rates during the renewal process.