Insurance Australia Group
Limited (IAG) has extended the quota share agreement with Munich Re that covers 30 per cent of IAG’s compulsory third party (CTP) business.
The new agreement took effect from 1 July 2016 and will run for a minimum of four years, with an option for a further two years. The pact extends the existing quota share agreement for CTP businesses written in New South Wales and Australian Capital Territory; and included South Australia, where one of IAG’s brands started as an underwriter.
The original agreement, which was enforced on 1 July 2013 for a minimum of three years with an option for a two-year extension, was designed to enhance IAG’s capital efficiency.
In a statement, IAG said that before the agreement, CTP accounted for less than 10 per cent of its gross written premium, yet roughly a quarter of its regulatory capital requirement.
The quota share agreement with Munich Re operates alongside IAG’s 10-year, 20 per cent whole-of-account quota share pact with Berkshire Hathaway. From July 2015, a total of 50 per cent of IAG’s CTP business is subject to quota share.
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