IAG has extended a quota share agreement with Munich Re that covers 30% of the company’s compulsory third party (CTP) business.

The agreement is for a minimum of four years from July 1 this year, with an option for a further two, and for the first time includes SA, where IAG’s SGIC brand has started as a CTP underwriter.

Previous arrangements for business written in NSW and the ACT have been extended on similar terms and conditions.

“The extension of the agreement with Munich Re preserves the enhanced capital efficiency that the original agreement conveyed,” IAG says.

The original deal took effect from July 1 2013 for a minimum of three years, with an option to extend for two.

Previously, CTP represented less than 10% of IAG’s gross written premium but about a quarter of its regulatory capital requirement.

The Munich Re deal operates alongside an arrangement with Berkshire Hathaway that began last year.

“This means 50% of IAG’s CTP business is subject to quota share,” the company says.