IAG to release A$200m of COVID-19 business interruption provision

Following a Federal Court case management hearing on December 5, 2024, regarding the class action filed against its subsidiary, Insurance Australia Limited (IAL), IAG has announced plans to release A$200 million from its A$380 million COVID-19 business interruption provision.

The Federal Court of Australia’s case management hearing also ordered that the proceeding cease to be a class action, effective 26 March 2025.

Additionally, group members will be bound by certain rulings reflecting the Federal Court’s findings in the earlier business interruption test cases unless they “opt out” of the class action by 24 March 2025.

The case management hearing also ordered that a notice be issued and published on the Slater & Gordon and Federal Court websites to inform group members about the declassing, the process for opting out of the class action by 24 March 2025 if they do not wish to be bound by the Federal Court’s rulings, and how they can submit a claim directly with IAL.

According to IAG, the representative applicant in the class action has not sought leave to appeal these orders, and the deadline has now passed.

In light of the expiration of the appeal period, IAG has reportedly reviewed its business interruption provision.

The firm explained that, based on an actuarial assessment and subject to final board and audit review, it expects to release A$200 million of the A$380 million provision.

“The remaining provision reflects the potential for further valid business interruption claims to emerge. The A$200 million release will be included in the ‘Net Corporate Expense’ line in its financial results for the six months to 31 December 2024,” IAG said.

In 2022, IAG stated that there would be no changes to its $1.222 billion net provision for potential business interruption claims related to the COVID-19 pandemic.

At the time, IAG noted that as the legal position became clearer and claims experience developed, it would refine its estimate of the ultimate claims cost and adjust its provisions accordingly.

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