Last week's heavy storm in Victoria has prompted insurance giant IAG to cut its expected insurance margin.

IAG has stated that it now expects an insurance margin of around 10.5 to 12 %, which is a significant drop from its previous expectation of around 11.5 to 13 %, for the year to June 30.

Australia's largest general insurer said it had received more than 36,000 claims from the storm, which lashed houses, cars and businesses in Victoria with hail and torrential rain last Saturday and Sunday.

"We now believe the scale of this event means we will make claims on our catastrophe reinsurance covers, which will cap the group's total pre-tax loss at $135m”, Michael Wilkins, Managing Director of IAG, revealed in a statement.

"The group's maximum event retention (highest possible loss) for any subsequent event in calendar year 2010 now reduces to $75m”, he said.

The negative impact on insurers' earnings had already been predicted by Broking analysts earlier this week.

According to RBS Insurance Analyst John Heagerty, claims of $100 million for IAG would straightaway wipe 7 per cent from its 2010 profits.