QBE cat losses over budget. With Covid-19 expects US $750m loss in H1

Australia headquartered global insurance and reinsurance group QBE has revealed an expectation of a US $750 million loss for the first-half of 2020, as its catastrophe losses came in over budget and it forecast a $335 million hit from Covid-19 in the period.

Overall, QBE forecast its total losses from the Covid-19 pandemic as being around $600 million pre-tax, $335 million coming in the first-half of this year.

Catastrophe losses during the first-half are reported to be $310 million, up from $180 million in the prior year and well over the companies $250 million budget.

The catastrophe loss hit was driven by the bushfires in Australia, as well as the Australian east coast hail and storm activity in the period.

Absent the Covid-19 losses and the above budget catastrophe burden, QBE said that its combined ratio would actually have been around 3% better than the prior year, as its attritional claims ratio improved by around 2%.

Even with the catastrophe losses, but excluding Covid-19, the combined ratio is forecast at 95%, which is a one percent improvement on 2019’s H1 figure.

But with Covid-19 pandemic impacts, QBE said its combined ratio for the period will be around 104%, with prior accident year claims development of around $120 million another factor affecting the company in the first-half, with U.S. business a key driver of this.

QBE said its impacts from the pandemic are across lines such as business insurance including property (business interruption), reinsurance, workers’ compensation, casualty (including D&O), accident & health (A&H), trade credit, lenders’ mortgage insurance (LMI) and landlords’ insurance.

Further pandemic claims could come from trade credit and LMI, but also in casualty (including D&O), A&H, landlords’ insurance and other classes of business.

The overall impact to QBE is expected to be a net statutory loss after tax of around US $750 million, including the pandemic claims, above budget catastrophe loss experience and prior accident year claims development, as well as a net investment loss of around $125 million caused by investment market volatility.

QBE Group CEO, Pat Regan, commented, “Despite the impact of COVID-19, I am encouraged by the strong underlying trends evident in the result. Notwithstanding significant uncertainty surrounding the enduring impact of the COVID-19 pandemic, our greatly strengthened capital base positions us well to capitalise on accelerating pricing momentum and emerging organic growth opportunities.”

QBE recently took a range of actions to shore up its regulatory capital as a direct response to the Covid-19 pandemic, including buying more catastrophe reinsurance specifically to reduce its exposure to U.S. perils.

It’s expected the companies reinsurance will have responded to the above budget catastrophe losses and possibly also the adverse prior year development as well.