QBE warns climate change could render insurance ‘unaffordable’ in exposed areas

The impact of climate change could make insurance premiums unaffordable in communities served by QBE, its group chief executive officer Pat Regan has warned.

Commenting as the company published its annual results for 2019, he said: “Over the long-term QBE anticipates that the physical impacts of climate change – even under scenarios consistent with the achievement of the Paris Agreement – will result in its customers seeking increased insurance for the protection of their assets and the services they provide.

“We also recognise that over the longer-term, climate change will impact our customers and the communities that we serve. This may cause insurance premiums to become unaffordable, especially for customers in areas more exposed to weather-related events, potentially resulting in a loss of revenue.

“In order to address this risk, QBE is engaging with external stakeholders, including national and local governments, to encourage adaptation and resilience measures against weather-related events.”

QBE’s 2019 results included A$13.4 billion ($8.9 billion) gross written premiums, compared to A$13.6 billion in 2018. It achieved A$672 million operating profit, compared to A$627 million in 2018. Its combined operating ratio rose to 97.5 percent in 2019 (excluding the one off impact of the Ogden decision in the UK) from 95.7 percent percent in 2018 (which excluded a transaction to reinsure Hong Kong construction workers’ compensation liabilities). The Australia Pacific division reported especially strong results, with a combined operating ratio of 90 percent - despite 2.6 percent higher costs of catastrophes.

“With good progress against our seven priorities in 2019, and with a stronger culture and risk management now firmly embedded in our day-to-day operations, we are more resilient and better equipped to respond to a changing regulatory environment,” said Regan.

“For 2020, we have developed a new set of priorities that will further concentrate
our efforts on our key differentiators, helping us build a reputation for value, service, claims payment and performance.

“We are evolving our business at the same time as technological disruption continues to reshape the global economy and revolutionise entire industries. We are determined to stay ahead by building best in class AI, data and digital capabilities that will enable us to better support our customers in assessing and mitigating risk, while delivering every‑day brilliance in underwriting, pricing and claims.”