QBE is examining risk exposures within its global property portfolio following changes in the reinsurance market and as storms and floods in the US and New Zealand impacted underwriting results in the first half.

The insurer reported today that its catastrophe costs were affected by winter storm Elliott and convective storms in the US and record flooding in New Zealand. The first-half combined operating ratio deteriorated to 98.8% from 94.9%.

Group CEO Andrew Horton says there’s been a step-change in reinsurance markets in regards to pricing and retention levels, and the company is assessing its exposures as it seeks to reduce volatility in a changing environment.

“We’re retaining a much larger chunk of any catastrophe loss before it goes into the reinsurance program than we did, so that means to manage that we needed to look at the insurance exposure we’re taking onto our balance sheet,” he told insuranceNEWS.com.au.

Convective storm losses in the US have fallen on insurers rather than reinsurers, given levels at which they are willing to step in, while this year North Island catastrophes have changed reinsurer views on New Zealand risks.

“People are finding that reinsurers aren’t willing to renew at the same level that they were for the New Zealand exposure,” Mr Horton said. “For this year the reinsurance will be picking up the majority, probably, with the New Zealand event, but I’m not sure that would apply again if it happens next year or the year after.”

Mr Horton says property is close to about a third of the group’s business, and it’s not targeting a change in the proportion, but looking to ensure it has the right balance on its exposures and on improving tools, models and capabilities to reflect risks.

QBE first half net profit rose to $US400 million ($611 million) from $US48 million ($73 million) in the year-earlier period, the company reported today, as investment returns provided a tailwind and gross written premium gains (GWP) boosted the top line.

GWP rose 13% to $US12.8 billion ($19.6 billion) supported by group-wide renewal rate increases of 10.2%, while rising interest rates help boost the investment income to $US662 million ($1 billion) compared to a prior loss of $US20 million ($30.6 million).

The North America combined operating ratio deteriorated to 106.9% from 95.9%, Australia Pacific moved to 98.9% from 92.9% following elevated inflation in property and motor and the New Zealand weather catastrophes, while the International division improved to 93.2% from 95.4%. 

Mr Horton says improvements in North America, which has often been a problem area for the company in the past remain a priority, but the business has been simplified and many parts are performing well.

“We haven’t been as consistent in our US business as we could or should have been, and we just need to get that consistency, and bring everything up to the level of the best,” he said.

QBE also announced today that Peter Burton – currently Executive Director International Markets at QBE European Operations – has been appointed to the role of Group Chief Underwriting Officer.