QBE NA programs book GWP surged 23% in Q2

QBE has reported strong top line growth in its North American programs book of business driven by rate increases at a time when it has also reduced cat exposures.


In its earnings this week the Sidney, Australia-based global carrier said that gross written premiums from North American programs reached $404mn in the first half of 2020, a 23 percent increase on the prior-year period.

A strong driver of the increase was rate increases, which averaged 17 percent across the book.

But at the same time the company said that increases in premium rate adequacy of 8 percent came as it also reduced its exposures in certain areas.

“Where our property programs specifically cover wind and quake exposure, the key here is to manage your aggregate cat exposure, best measured by what we call the PML, or probable maximum loss, against the revenue pool that you’re writing and the rate you’re getting for that risk,” said group CEO Pat Regan on QBE’s earnings call.

He added that over the last 12 months, as well as growing top line and securing rate increases, the insurer had focused renewals and new business in the right geographic areas to reduce its PML by 6 percent.

QBE programs chart

“The net result of this is a strong combined ratio, improved rate adequacy by 8 percent while also reducing cat volatility and capital intensity,” he said.

Pricing momentum in programs compared favourably to the overall North America book for QBE, where rates increased by 10.4 percent in H1.

QBE North America overall wrote $3.08bn of premium in the first half of the year, up 14 percent from H1 2019, as the company highlighted “strong growth in profitable segments including A&H, crop and property programs”.

But the combined ratio deteriorated from 99.9 percent to 108.8 percent, including 8.0 points from prior-year development on exited portfolios, and 4.0 points from the impact of Covid-19, largely in its workers compensation business.

The growth in programs comes at a buoyant time for the sector with strong pricing momentum and new business as well as churn of deals as some capacity providers retrench.

QBE describes itself as one of the largest program carriers in North America, focusing on underserved SME commercial customers as it distributes its offerings through program administrators.

The insurer’s programs book has caused it difficulties in the past, however, with historic retrenchment after seeing significant adverse development leading as part of a series of wider reserve charges in its North America business in the last decade.