IAG has increased its catastrophe reinsurance by $600 million to $4.7 billion for this year.

The total cost of reinsurance for the financial year ending June 30 is expected to be between $700 million and $720 million. Last year IAG paid $620 million for its reinsurance.

“While the overall cost of the program has risen, the outcome is consistent with the assumptions contained in the insurance margin guidance of 10-12% provided by the group at the outset of the financial year,” Mr Wilkins said.

The 2012 reinsurance program includes cover for flood, which will be offered by CGU and Australia Direct nationally.

The reinsurance provides for main catastrophe cover for losses up to $4.2 billion with the group paying the first $250 million of each loss.

IAG has also secured earthquake cover for Australia and New Zealand for three years.