Chirstchurch earthquake: Insurers' viability still intact - IAG

SYDNEY - Insurance Australia Group Ltd says this week's earthquake in Christchurch does not jeopardise the viability of the insurance industry.

Early estimates of the damage bill from Monday's devastating earthquake are in the range of A$12 billion ($16.1 billion), but IAG chief executive Mike Wilkins on Thursday said it was far too early for such an assessment.

"I've got to say it is early to be postulating those sort of numbers," he told journalists.

"We are still not able to actually get back into our office in Christchurch and I think there's a number of people that are doing that.

"It's an estimate and that's all it is.

"I don't believe that it goes anyway to threatening the viability of either primary insurers nor of reinsurers."

Reinsurance cover will see the cost of this week's earthquake to IAG capped at A$40 million.

IAG on Thursday reported a 51 per cent drop in first half net profit, in results that were extensively released in trading updates in recent weeks.

Net profit for the six months to December 31 was A$161 million, down 51 per cent from A$329 in the previous corresponding period.

The result was weighed down by a $121 million loss from its UK business, and further losses are expected in the second half of the financial year.

"We remain confident this business can achieve a satisfying return over the longer term," Mr Wilkins said of the UK operations.

IAG repeated its recently updated guidance of a full year insurance margin in the range of eight to 10 per cent and gross written premium growth of three to five per cent.

Hit by floods, storms, bushfires and earthquakes, natural peril costs in the full year are forecast to be A$540 million, exceeding the A$435 million allowance that was in place at start of the financial year.

IAG declared a fully franked interim dividend of nine cents per security, and its shares were down three cents to A$3.64 at 1401 AEDT (1601 NZT).

Mr Wilkins used the opportunity to defend the insurance industry against widespread criticism since Queensland's floods.

He called for more extensive flood mapping in order to better cover such events.

"IAG doesn't cover, nor do we charge a premium for floods affecting home and contents in Queensland," Mr Wilkins said.

"Without accurate and up-to-date data it's difficult for insurers to anticipate the risk of flood and therefore price for it in their premiums."

He called for a collective approach in putting together flood maps for Queensland and Victoria, the only states without such data.

"From an insurance perspective this flood mapping data will go a long way to making flood cover more available," Mr Wilkins said.

IAG businesses, including NRMA and CGU, are "absolutely transparent" about what is and what is not included in their policies, and will continue to work to ensure transparency, he said.

- AAP