S&P positive on QBE, despite Hurricane Irma exposure [IMG] QBE's...

S&P positive on QBE, despite Hurricane Irma exposure

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QBE's reinsurance programs "caps" its catastrophe exposure.

S&P global ratings director of insurance ratings Craig Bennett says there it has no plans yet to downgrade QBE Insurance Group, despite the the insurer having more exposure to once-in-a-century hurricane Irma than other major Australian insurers.
Irma, which has already hit the north-east Caribbean, has been described as one of the most powerful storms ever recorded, and could become one of the most destructive. She has now been joined by Hurricanes Jose and Katia churning in the Atlantic.
Unlike IAG and Suncorp, QBE has major operations in North America, but Mr Bennett said the global insurer had robust reinsurance which should soften the earnings impact of the storms.
"They reinstated their cover and have group risk and catastrophe cover which really caps the exposure, with the risks transferred to their reinsurance entity Equator Re," he said.

Insurers take out reinsurance policies so that a portion of their risk portfolios are held by other parties which reduces the likelihood of them having to pay out large sums from an insurance claim.

Underwriting general and reinsurance risks, investment management and management of the economic entity's share of the NSW and Victorian workers' compensation scheme.


QBE declined to comment. The stock rose 0.2 per cent to $10.12 on Thursday, after falling sharply on Wednesday.
In tandem with its reinsurance agreement, Mr Bennett said QBE had a strongly performing business, despite ongoing challenges in its Latin American arm.
"Their business is performing well in most of the large centres they're in (UK, North America and Australia). They did have heightened claims in Latin America and Hong Kong, but in the scheme of things they are quite small and they are still on positive outlook," he said.
"The nature of the devastation hasn't been quantified let alone assessed."

Mr Bennett said all Australian property insurers have "well-structured" reinsurance programs as they look to mitigate the impact from earnings coming from the steadily increasing claims coming from natural peril events.
According to to S&P, results in the first quarter of 2017 saw significant peril events such as tropical cyclone Debbie, the impact of the Kaikoura earthquake, and a Sydney hailstorm which increased insurer's collective loss ratio increased to 81 per cent for the quarter, up from 64 per cent for the year to December 31 2016.
"What's also important is they are generally well spread among a number of countries providing that reinsurance, so you're not relying on a single entity to cover them," said Mr Bennett.