QBE has forecast strong pricing globally will continue into next year and stressed any COVID-19 business interruption claim impacts will be limited by reinsurance, after reporting a first-half loss of $US712 million ($996 million).

Gross written premium (GWP) rose to $US8.01 billion ($11.21 billion) from $US7.64 billion ($10.69 billion) a year earlier, while the combined operating ratio deteriorated to 103.4% from 95.2%.

QBE warned last month that it may report a loss of around $US750 million ($1.05 billion). The result today included a flagged $US335 million ($469 million) COVID-19 impact, and a forecast for future impacts of $US265 million ($371 million), mainly in lenders’ mortgage insurance and trade credit.

CEO Pat Regan says “notwithstanding uncertainty surrounding the enduring impact of the COVID-19 pandemic”, the group is well-placed to capitalise on accelerating pricing momentum and emerging organic growth opportunities.

“The improving industry landscape coupled with the fundamental disciplines we have instilled in the business underpin my confidence in our ability to drive sustained margin improvement,” he said.

Mr Regan told a briefing that second quarter premium rate growth of 10.2% was the highest group-wide increase since the aftermath of the September 11, 2001 attacks in the US.

Momentum was driven by the US and international markets, while gains in Australia were muted by decisions to hold prices steady in some areas as part of SME assistance measures.

“Looking forward, I certainly expect the pricing environment to remain supportive for the rest of 2020 and at this point well into 2021,” Mr Regan said.

Interest rates near zero are requiring insurers to compensate through their underwriting, while casualty and natural catastrophe claims trends continue to support the stronger trends, he says.

Mr Regan says there is only $US20 million ($28 million) of downside risk from business interruption claims anywhere in the world for the group, following US$70 million ($98 million) booked for the UK, because of the company’s “all perils” reinsurance.

“All perils are covered unless there is something specifically excluded, and there is no pandemic exclusion in our reinsurance treaties,” he said. “That is different to some other cheaper ‘named perils’ reinsurance that other companies may buy.”

Mr Regan also says, ahead of a test case in Australia, that the local industry specifically excluded SARS from policies following regulatory stress testing in the wake of disease outbreaks in the 2000s.

“It’s worth noting that the medical name for COVID-19 is SARS-CoV-2,” he said. “While there is some technical debate about policy references to the Quarantine Act as amended versus the Biosecurity Act, both Acts specifically and categorically exclude COVID-19.”

QBE’s first half-loss compared with a net profit a year earlier of $US463 million ($648 million), and included a pre-tax investment loss of $US90 million ($125.9 million) compared with a $US755 million ($1.1 billion) profit a year earlier.

Australia Pacific GWP rose 1% in the half to $US1.83 billion ($2.56 billion) on a constant current basis and excluding disposals, while the combined operating ratio deteriorated to 96.4% from 90.5% a year earlier.

North America GWP rose 14% to $US3.08 billion ($4.31 billion), with the ratio worsening to 108.8%, while for the International business GWP rose 12% to $US3.15 billion ($4.41 billion) and the ratio deteriorated to 97.5% from 94.3%.