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If hes going to pay for it and you are happy with that then i dont see that you need to tell the insurance, insurance companies are swines and theyll probably put your premium up anyway just for the sake of it!
Hmmm, the insurance industry will say that you should report ALL incidents regardless of cost, blame etc!!! If you think this guy is starting to take the piss (hell probably have figured out youve not informed your insurers) then ring your ins co and tell them whats happened BUT get them to use your legal cover to claim directly from HIS POLICY, not yours, that way you get your car fixed and leave your own insurance claim free......winner