QBE will raise up to $US825 million ($1.3 billion) to shore up its capital defences due to “unprecedented economic and investment market uncertainty” as the coronavirus pandemic continues.

The action, which QBE describes as pre-emptive and prudent, comes as the company also today reported strengthened insurance trading conditions in the first quarter.

Underlying gross written premium (GWP) rose more than 9% to $US4.533 billion ($7.12 billion) on rate rises and volume gains, while QBE sees only a “modest” GWP virus impact this year on its broader portfolio, excluding trade credit and lenders mortgage insurance (LMI).

“Despite the extraordinarily difficult landscape, QBE commenced the year with strong pricing momentum and underlying premium growth,” Group CEO Pat Regan said.

“The capital plan we have outlined positions us to navigate this period of extreme uncertainty with demonstrable strength and gives us the flexibility to pursue organic growth opportunities that may arise over the medium term.”

The capital raising involves a $US750 million ($1.2 billion) fully underwritten institutional placement at $8.25 per share and a non-underwritten share purchase plan for up to $US75 million ($118 million).

The insurer also outlined the expected impact of COVID-19 on its insurance risks, including for trade credit and LMI, where it has made changes to reduce its exposure.

QBE GWP last year totalled $US13.4 billion ($21.1 billion) with $US195 million ($306.4 million) from trade credit and $US161 million ($253 million) from lenders mortgage insurance.

The insurer says a reduction of about 25% in trade credit buyer limits and reduced exposure to sectors sectors such as travel, leisure and retail have helped de-risk that portfolio.

The trade credit book risk profile is significantly better than during the global financial crisis (GFC), it says. A modelled trade credit loss in a GFC-like scenario would be $US200 million ($314 million), net of quota share and clash reinsurance.

For LMI, under three-year incremental claims scenarios, the impact could be $US105 million ($165 million) with an 18% drop in property prices and 9% LMI mortgagor unemployment, or $US240 million ($377 million) with a 29% drop in property prices and 12% unemployment.

In the broader portfolio, business interruption exposure is limited due to physical damage triggers and pandemic exclusions, while landlord (rental default) is modest.

The Australian travel insurance business was sold last year, and QBE does not write any material event cancellation and contingency business.

This year’s net expense ratio is still expected to be around 14% with prudent cost management, the company says in the broader portfolio impact outline.

QBE will complete the institutional placement tomorrow, while the purchase plan offer for retail shareholders opens on Tuesday next week and closes on May 11.