Insurance Australia Group (IAG) is facing a hefty bill of up to $200 million to cover damage inflicted by the Christmas Day storms that ripped through Melbourne.

The destructive storms capped a bad year for local insurers, in which floods, storms and earthquakes resulted in hundreds of millions of dollars in claims.

IAG said on Tuesday its Australia Direct and CGU businesses had so far received about 24,000 claims following the hailstorms and severe weather on December 25.

More claims are expected to be lodged as residents return from holidays to find damaged property.

The general insurer expects the eventual net claims cost to total between $180 million and $200 million.

That would take the company’s overall claims costs from natural disasters in the first half of the financial year to between $400 million to $420 million.

The money it had set aside to cover such events during the period was $266 million.

IAG’s rival Suncorp, which owns the AAMI brand, has previously estimated the Christmas Day storms would cost it between $200 million and $250 million.

The wild weather brought huge hailstones, torrential rain and flash flooding to Melbourne and northwest Victoria, causing damage mainly to cars and houses.

IAG shares dropped immediately after the insurer issued its update but recovered to close up six cents, or two per cent, at $2.97.

The stock had dropped 2.3 per cent when Suncorp issued its announcement on January 7.

IAG did not indicate whether the costs of the storms would impact its earnings guidance for 2011/12.

A more detailed update on the cost of the storms is expected when the insurer releases its first half results in February.

IAG reaffirmed in early January that its insurance margin growth would be between 10 and 12 per cent as it reported the terms of its latest reinsurance cover.

The new cover took effect from January 1.

Under its cover to the end of December, IAG’s maximum potential exposure to a single event was approximately $250 million.