By Alice Uribe
SYDNEY-- QBE Insurance Group Ltd. is prepared to further lift the cost of premiums if claims keep growing due to natural catastrophes.
Interim Chief Executive Richard Pryce said the general insurer remained vigilant on claims inflation and was reviewing its catastrophe-exposed portfolios and re-assessing its modelling.
"The rising frequency and severity of catastrophe costs is one of the more difficult issues that the industry is presently grappling with. We continue to view all catastrophe exposure with caution. We still consider the pricing of catastrophe risk to be merely adequate rather than margin enhancing," he said Thursday, after unveiling QBE's results for the first half of fiscal 2021.
Catastrophe claims for the half were US$426 million, or 7.0% of net earned premium, sharply higher from US$308 million, or 5.5%, in the first half of the previous year. They were 1.6% above the group's increased allowance.
The costs were dominated by winter storm Uri in Texas, widespread flooding on the east coast of Australia and Cyclone Seroja in Western Australia. For North America, the winter storm in Texas was estimated to be a US$10 billion-US$15 billion event for the industry, said QBE.
Mr. Pryce described the recent trends in catastrophe costs as "concerning."
"We remain vigilant on claims inflation and will not hesitate to further increase our pricing and reserving assumptions should any signs of a sustained acceleration in claims inflation emerge," he said.
At the same time, QBE's premium rates continued to strengthen in the first half, but Mr. Pryce said there were signs that rate momentum was moderating in some markets, particularly in International Markets. Still, Australia Pacific benefited from the end of pandemic-related pricing relief initiatives put in place in 2020
For the fiscal first half, premium rates continued to improve with group-wide rate increases averaging 9.7% during the half, compared with 8.7% the year before.
Mr. Pryce said that there were many factors that would support an ongoing increase in premium prices, including the recent elevated, and possible acceleration in catastrophes, negligible interest rates, and the need for the insurance industry to build its reserves to manage the potential for a more sustained increase in claims.
"In summary, I believe rates in most products and geographies need to continue to increase to offset the factors I just mentioned above," he said.
QBE reported a half-year net profit of US$441 million, driven by a material turnaround in underwriting and investment returns. This compared with a net loss of US$712 million a year earlier when it absorbed underwriting losses due to Covid-19 and a net investment loss caused by extreme volatility in investment markets.
Write to Alice Uribe at email@example.com
(END) Dow Jones Newswires