IAG is raising $NZ150 million ($114 million) through an issue of unsecured subordinated bonds to the New Zealand market.

The bonds will give the insurer a natural currency hedge for its New Zealand operations, which include State Insurance and NZI.

The minimum subscription will be $NZ5000 ($3800) and the interest rate will be at least 7.5%.

IAG flagged the issue at its recent AGM. It says the funds will be used for general corporate purposes and to give added flexibility in managing its future refinancing.

It can raise up to an extra $NZ100 million ($76 million) if the issue is oversubscribed.