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QBE increases cat reinsurance tower at Jan 1st renewals

11th January 2021 - Author: Luke Gallin

Australian insurer and reinsurer, QBE Insurance Group Limited, has increased the size of its main catastrophe reinsurance tower by roughly 3% to $3.4 billion for 2021.

QBEThe re/insurer has now completed its Jan 1st, 2021 reinsurance renewal, noting that the program was placed broadly in line with expectations and at terms “slightly better than allowed for in the Group’s business planning assumptions”.

Alongside the increase in the main catastrophe tower, key changes to the structure of the Group’s program for 2021 includes some adjustments to its retentions.

At the renewal, QBE secured a North America peak catastrophe retention of $200 million, against an initial retention of $400 million in 2020 which reduced to $150 million in April 2020 as part of the company’s COVID-19 de-risking initiatives.

Additionally, the 2021 program features an Australian and U.S. non-peak catastrophe retention of $175 million, against a retention of $125 million in 2020, while QBE’s retention for all other non-peak perils remains at $100 million.

At $500 million for 2021, the catastrophe aggregate limit is also unchanged. Although, this layer of protection attaches at $625 million for the 2021 program compared with $545 million in 2020, with a pre-occurrence deductible of $10 million, compared with $5 million in 2020.

The per risk XOL cover renewed materially as expired, while the 50% Equator Re quota share also renewed as expired. Additionally, QBE has reported a largely unchanged divisional per risk and catastrophe retentions.

According to QBE, the multi-year nature of its main catastrophe reinsurance program of $2.1 billion excess $400 million, limited the risk-adjusted premium rate increase to under 5%, while the total increase in reinsurance spend on the Group’s XOL reinsurance program amounted to roughly $30 million, or up 10%.

Overall, QBE explains that, anticipating the new structure and allowing for heightened catastrophe activity, the Group’s 2021 financial plans and pricing assumptions include a net catastrophe allowance of $685 million, which is up from $550 million in 2020 and broadly in line with the 2020 retained experience.

QBE’s Interim Group Chief Executive Officer (CEO), Richard Pryce, commented: “I am pleased that we have renewed the Group’s reinsurance structure broadly consistent with the expiring program and at terms slightly better than budget. The reinsurance renewal (including increased catastrophe allowance) has been factored into our pricing models and we remain confident of driving appropriate margin expansion in 2021.”

On a like-for-like basis, QBE notes that the probability of exceeding its increased catastrophe allowance in 2021 is lower than in the previous year.

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