IAG has secured cover for about a third of its gross claims costs after renewing one of its whole-of-account quota share arrangements with reinsurance provider Hannover Re. 

The arrangement with Hannover Re was due to expire at the end of last month and the new five-year contract takes effect this month. 

The insurer’s whole-of-account program applies to 32.5% of natural perils. In January the insurer announced it had agreed to renewal terms with Munich Re and Swiss Re representing 10% of the 12.5% program that was set to expire at the end of last month. 

“IAG has now renewed all four whole-of-account quota share reinsurance arrangements with leading global reinsurers,” CFO Michelle McPherson said. 

“These arrangements cover 32.5% of all gross claims costs, meaning we are only required to purchase 67.5% of the main catastrophe program in global reinsurance markets.” 

She says the quota share arrangements have been renewed providing “materially consistent financial outcomes” and are “particularly valuable” in a challenging reinsurance market. 

In the update provided on Friday IAG also announced it has purchased aggregate and reinsurance covers for third and fourth events for this financial year to June 30 2024. 

“The covers have been placed to 67.5% to reflect IAG’s whole-of-account quota share arrangements,” IAG said. 

“After allowing for the quota share arrangements, IAG has a maximum event retention of $169 million for a first and second event.” 

The aggregate cover will provide protection of $250 million in excess of $600 million, with individual qualifying events capped at $200 million in excess of $50 million per event. 

For the third and fourth events covers have been purchased to provide $150 million of protection for events greater than $200 million. 

IAG will release its 2022/23 financial results and guidance for this financial year on August 21.