Ahead of the release of its results for H1 2020, Australian insurer QBE has reported that it expects to incur a COVID-19 underwriting impact of around $335 million for the period.
The group is anticipating a combined operating ratio of around 104% for the first half of the year, reflecting COVID-19 losses, catastrophe losses of $60 million, and adverse prior year claims development of $120 million.
The H1 COVID-19 underwriting impact of $335 million includes $150 million of net incurred claims, $115 million of additional risk margin related to pandemic uncertainty, $50 million of premium concessions and reinsurance reinstatement costs, and $20 million of expenses including motor vehicle funds.
QBE said the pandemic will impact multiple lines of business, including property (business interruption), reinsurance, workers’ compensation, casualty (including D&O), accident & health (A&H), trade credit, lenders’ mortgage insurance (LMI) and landlords’ insurance.
At this stage the insurer estimates total COVID-19 related costs to be around $600 million pre-tax, including around $265 million of potential further net claims that could emerge over the next 12-18 months,
It’s thought that these claims will primarily emerge in trade credit and LMI, but also in casualty (including D&O), A&H, landlords’ insurance and other classes.
Excluding COVID-19 impacts, the 1H 2020 combined operating ratio is expected to be around 98% and the current accident year combined ratio will be around 95%, compared with 96% in H1 2019.
An improvement in the attritional claims ratio coupled with a pleasing reduction in large individual risk claims offset an increase in catastrophe claims to around $310 million from $180 million in 1H19.
This exceeded QBE’s $250 million allowance and reflected devastating and widespread bushfires in Australia coupled with significant Australian east coast hail and storm activity.
But results will be helped by hardening premium pricing trends, with renewal rate increases averaging 8.7% during H1, compared with 4.7% for the same period last year.
“Despite the impact of COVID-19, I am encouraged by the strong underlying trends evident in the result,” said QBE Group CEO Pat Reagan.
“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.”
