Reinsurers sweat on IAG deterioration
International property reinsurers are anxiously anticipating a change in IAG's loss notification from the second New Zealand earthquake after Suncorp added a further $500mn to its total last month.
Suncorp's increased loss estimate took its total ground-up loss to $2.1bn, leapfrogging the $1.9bn figure that IAG issued as far back as May.
The increased loss notification is one of the major instances of loss creep from the New Zealand disaster, and has hurt companies including Amlin and Platinum in recent weeks.
In light of Suncorp's revised gross claim, IAG's three-month old loss notification looks vulnerable to deterioration, particularly in view of the market share data.
According to its website, IAG is the largest fire and general insurer in New Zealand with a market share of 35 percent. According to Standard & Poor's, Suncorp is the second largest non-life insurer in New Zealand with a market share of around 23 percent.
If the Suncorp loss is increased proportionally to reflect the higher market share of IAG, then the gross loss figure yielded is a mammoth $3.2bn.
This picture should perhaps be qualified somewhat by Suncorp's higher weighting towards the business and commercial risks that comprised a higher proportion of losses from the second earthquake.
Nevertheless, the IAG number does seem low relative to the figure issued by Suncorp.
According to one reinsurance source, IAG is waiting on the resolution of litigation involving the New Zealand Earthquake Commission before it reassesses its reinsurance claim.
Regardless of the extent of any deterioration, IAG is likely to have responsive reinsurance in place.
The Australian insurer is protected by a Guy Carpenter-placed A$3.85bn xs A$250mn catastrophe reinsurance programme, giving it ample headroom.
QBE is the third biggest (re)insurance company in New Zealand and states its own market share at 15 percent.
The (re)insurer has revealed that it is protected by a reinsurance programme that offers $1.3bn xs $200mn of cover, but no information on the size of its gross loss has emerged.
Extrapolating from the Suncorp loss and the relative market shares, calculations suggest that QBE's gross loss could be in the region of $1.4bn.
Initial industry-wide forecasts suggested losses of $8bn-$10bn. However in the last couple of months underwriters have been talking about losses in the $12bn-$16bn range.