IAG to release A$200mn in Covid-19 business interruption reserves

By Michael Jones

Jan 31 - (The Insurer) - IAG has said it expects to release A$200mn ($124.42mn) of reserves after the expiry of the appeals period for a business interruption (BI) policyholder class action filed against Insurance Australia Limited (IAL).

The move follows two updates from the Australian federal court. The first, in September, said that the court intended to declass the representative proceeding against IAL.

On 5 December, the court said the proceeding would no longer continue as a class action as of 26 March 2025.

It said that group members would be bound by certain rulings unless they opted out of the class action by 24 March 2025. The update said those that opted out could make a claim directly with IAL.

IAG said that the representative applicant has not sought to appeal against these orders and the time period for seeking appeal has now expired.

Given the expiry of the appeal period, IAG said it expects to release A$200mn of the A$380mn provision it had in association with this legal case.

It said the remaining provision reflected the potential for further valid BI claims to emerge.

The A$200mn release is expected to be included in the net corporate expense line of its financial results for the six months to 31 December 2024.

IAG’s case was declassed alongside other representative claims, including Cody Gemtec Retail’s action against Lloyd's Australia Limited on behalf of Axa XL Syndicate 2003, Strand Fitness and others against QBE, and Vicki Field Swim School versus Hollard Insurance.

In 2023, IAG maintained its A$1.22bn net provision for potential Covid-related BI claims and predicted a release from the provision would occur following its appeal against the federal court ruling in Australia’s second BI test case.