IAG Insurance Australia Group Limited

By Robb M. Stewart

MELBOURNE, Australia--Insurance Australia Group Ltd. (IAG.AU) has extended a quota-sharing agreement with Munich Re that covers 30% of the Australian general insurer's compulsory third-party business.

The new pact, which will run for at least four years with an option for a further two years, extended the existing agreement for business written in New South Wales state and the Australian Capital Territory, and adds South Australia state where one of IAG's brands began as an underwriter in July.

The original agreement, which took effect from July 1 2013 for a minimum three years, was designed to improve IAG's capital efficiency. IAG said that before the deal, compulsory third-party coverage represented less than 10% of its gross written premium but about a quarter of its regulatory capital requirement.

The agreement with the German reinsurance firm operates alongside a 10-year quota share deal IAG began with Berkshire Hathaway Inc. in mid-2015. In all, 50% of IAG's compulsory third-party business is subject to quota sharing, it said.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

October 06, 2016 18:07 ET (22:07 GMT)

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