QBE’s reinsurance recoveries soar 174% to $1.144bn in H1

By the end of the first-half of 2023, global re/insurer QBE had received $1.144 billion of reinsurance recoveries, up a significant 174% on the prior year period.

Catastrophe losses have been expereinced at an elevated level by QBE in H1 of 2023, with events in New Zealand and the United States the main drivers.

In announcing its results this morning, CEO Andrew Horton commented, “Challenges from catastrophe events over the period serve to reinforce our focus and aspiration to build a more resilient and consistent business. While I’m pleased with the progress we’ve made across our strategic priorities, our performance this half highlights there is more work to be done.

“We’ve continued to make pleasing progress on each of our six strategic priorities, which are the key foundations to support our vision of being the most consistent and innovative risk partner. Our efforts over the near term will continue to concentrate around resilience and reducing volatility, which should drive more consistent outcomes for our people, customers and stakeholders.

“Our strategy to improve balance and returns in North America remains the primary focus for the Board and management. While our core business in North America is now in better balance, we remain focussed on portfolio quality, further reducing catastrophe exposure and better managing volatility.”

Back in July we reported that QBE had revised its catastrophe budget up for the year, as recent severe convective storm activity in the United States had created additional pressure on its catastrophe loss costs.

While some of QBE’s reinsurance protection are now less likely to attach than it was previously, with its aggregate protection shunken and some drop-down covers not renewed for 2023, the company has still benefited from inflows of recoveries from its reinsurance panel at an elevated rate this year so far.

Higher attachment points have also meant that QBE is retaining more of its catastrophe losses in 2023, but still the company is benefiting from its reinsurance arrangements, although some of the recoveries made in the first-half are likely after events occurring in prior years.

For H1 2023, QBE has reported $1.144 billion of reinsurance recoveries received, up by 174% on the $418 million received in H1 of 2022.

Horton and QBE are aware of the need to retain more risk going forwards, in the harder and stricter reinsurance environment.

This morning he told Australian media that as QBE now retains more risk before its reinsurance programs kick in, the company would be looking at the inwards side to reduce catastrophe exposure.

It’s no surprise he mentioned the US, given the recent experience with severe convective storm (SCS) losses there.

QBE reported the net cost of catastrophe claims at $699 million, or 8.7% of net insurance revenue for H1 2023, compared with 6.2% in the prior period.

In addition, QBE also experienced adverse development of $177 million, which largely reflected catastrophes from late 2022.

In North America the combined ratio was 106.9% for H1 2023, with “catastrophes materially above allowance and prior period,” QBE said.