Catastrophic start leaves QBE with $1.1b in kitty
Sydney Morning Herald
Tuesday March 15, 2011
THE global insurer QBE has headroom of $US1.1 billion to cover further large losses from catastrophic events this year, after revealing the Japanese earthquake and tsunami was likely to lead to net claim costs of $US125 million.The company's relatively minor exposure to the devastation caused by Friday's catastrophe is the result of insurance cover written through the Lloyd's of London market, specifically through an umbrella syndicate of underwriters.Analysts say the syndicate in question had recent gross written premium (revenue) of just over 1 billion ($1.6 billion), of which nearly three-quarters was taken up by two specialised underwriters of reinsurance cover and marine and energy insurance.QBE will pick up a proportion of insurance written by those smaller syndicates which it estimates to be $US125 million. That is just over 20 per cent of the $US560 million that the company has set aside for payouts related to one major catastrophic event this calendar year.It will also be comfortably contained within QBE's total budget of $US1.65 billion for which it has allowed a series of natural disasters around the world this year.Its current bill to this month stands at $US550 million after taking into account payouts for the Queensland storms, cyclone Yasi and the Christchurch earthquake, the latter of which has seen QBE's costs capped at $US175 million. However, the company still has to get through the six-month-long US hurricane season which starts on June 1.Yesterday's statement was aimed at trying to reassure nervous investors about QBE's loss exposures but its shares were nonetheless marked down 1 per cent - or 18 - to $16.99. That is $2 below its eight-month high of just four weeks ago.Insurance losses for the Japanese catastrophe - as opposed to the total economic cost and damage - are already estimated to be in the region of $US15 billion to $US35 billion.But most of that will be covered by domestic insurers and the government-backed Japanese Earthquake Reinsurance scheme.
© 2011 Sydney Morning Herald