With Cyclone Alfred barrelling towards the southeast coast of Queensland, residents will be battening down the hatches, heading to safety, and likely checking on their insurance coverage.

Judging by the recent moves in Insurance Australia Group Ltd (ASX: IAG) shares, investors aren't too concerned about the financial impact the cyclone could have on the S&P/ASX 200 Index (ASX: XJO) insurance company.

IAG shares are down 2.1% over the past five days, roughly in line with the 1.9% losses posted by the ASX 200 over this same time.

ASX 200 insurer reaches out to customers

In an update this morning to customers who may be impacted by the storm, IAG said communities across south-east Queensland and northern New South Wales should prioritize safety and brace for very strong winds, intense rainfall, potential flooding, and large swells.

"Cyclones, severe storms and flooding pose significant risks to people and property and it's critical everyone follows the directions and advice of the emergency authorities," IAG CEO Nick Hawkins cautioned.

"Many people across these communities have been impacted by extreme weather and natural disasters over the past few years, and we know this is an anxious time," he added.

As for potential costs ahead for IAG shares, Hawkins said:

We're coordinating our response through our Major Event Command Centre and our call centres across Australia and New Zealand are well prepared to support all our customers who may be impacted.

We have already contacted many customers to let them know the range of ways they can reach us immediately to lodge any claims and access support such as temporary accommodation and emergency financial assistance.

IAG shares partly buffered from potential fallout

IAG shares won't have to bear the full brunt of any looming damage costs from Cyclone Alfred.

The ASX 200 insurer noted that the Federal Government's Cyclone Reinsurance Pool provides protection for damage caused by "cyclonic wind and any cyclone-related water damage occurring for 48 hours after the cyclone is downgraded by the Bureau of Meteorology".

Management also highlighted the company's comprehensive reinsurance program, which includes:

• Quota share reinsurance that covers 32.5% of all losses
• Catastrophe cover that provides cover for 67.5% of all losses above $500 million and up to $10 billion
• Perils volatility cover of $680 million, which provides strong downside protection against retained natural perils costs exceeding the FY25 allowance of $1.283 billion

As of 13 February, IAG noted that its year-to-date natural perils costs were running around $100 million below management's expectation.

IAG shares are down 9% so far in 2025 but remain up 24% since this time last year.