Incoming QBE Group CEO Pat Regan “will face a challenging 12-24 months at least getting to grips with the complex and expensive aftermath of damaging natural peril events” researcher Morningstar has warned.

Its comment came after the insurer warned the local investment market last week that hurricanes and earthquakes which have devastated parts of the US, the Caribbean and Mexico since late August will affect its earnings this year.

QBE says the cost impact is still uncertain, but it has increased its allowance for large individual risk and catastrophe claims to $US1.75 billion ($2.23 billion), including allowances for the fourth quarter.

“There is therefore a pre-tax impact to earnings of about $US600 million ($766 million),” the Sydney-based global insurer said in a statement to the Australian Securities Exchange.

As reported in a Breaking News bulletin last week, its combined operating ratio target range has deteriorated to 100-102%, compared with the 94.5-96% range forecast at the half-year results.

Morningstar analysts say if the ratio reaches the revised level, QBE will post its first insurance underwriting loss since 2001.

“Profitability upside is now longer term and we look forward to evidence of improved performance [next year],” analyst David Ellis says in a research note.

QBE says that given catastrophe losses to date, this year will likely be the costliest on record for the global insurance industry.

“Cyclone Debbie in Australia earlier this year, hurricanes Harvey, Irma and Maria, which have impacted the Gulf of Mexico, the Caribbean and Florida, as well as the earthquakes in Mexico, have all impacted QBE’s business,” the insurer says.

QBE started the year with an expectation it would be exposed to losses totalling $US1.15 billion ($1.47 billion), with US$900 million ($1.15 billion) reinsurance cover providing protection for losses up to $US2.05 billion ($2.62 billion).

“While it is too early to speculate how much reinsurance and primary insurance pricing will rise as a result of recent catastrophe experience, QBE is well placed to benefit from price rises, with much of our reinsurance programs already purchased for [next year],” CEO John Neal says.

QBE last month announced Mr Neal will step down from January 1, with Mr Regan, who is at present CEO Australia and New Zealand Operations, to move into the top role.

“Despite occupying senior roles in QBE, the new CEO will face a challenging 12-24 months at least getting to grips with the complex and expensive aftermath of the damaging natural peril events,” Morningstar says.

Upside for the company is expected from restructuring, a US economic recovery, a stronger US dollar and higher long-term interest rates, the research note says.