Rate increases tapering in 2022, but higher-for-longer inflation must support pricing: QBE

Insurance rate increases will continue to taper into 2022, but with a solid floor for growth provided by industry concerns over claims inflation, the chief executive officer (CEO) of  QBE Insurance Group, Andrew Horton, has argued.

“Rate tapering will likely continue in those lines which may now be entering their fourth or fifth year of increase,” Horton told the Q4 earnings call. “But we do expect rate increases will remain above inflation.”

While the 2021 catastrophe experience and “ongoing uncertainty around climate change” gave the market its best rate momentum in 2021, claims inflation and the question of how-high-for-how-long has recently taken the baton, Horton believes.

QBE is pricing its offer, as well as stacking its reserves, on its latest inflation forecast, but warns of increased concern over the durability of inflation. The industry must price its offer in 2022 with very low visibility to costs one or two years down the road.

“We only find out in a few years,” Horton said when asked on rate sufficiency.

That has QBE scouring the data for every indication of an inflection point in the price trend. “It is imperative that we monitor these closely,” Horton said.

Rate momentum “remained strong” and exceeded management expectations throughout the second half of 2021. Year-end rate growth tapering was “more evident” outside in QBE’s international markets outside North American, he indicated. North American ultimately delivered 32% growth in GWP for QBE in 2021, ahead of 17% for Australia-Pacific and 15% for the international division.

QBE is now guiding for growth in gross written premium in 2022 in a “high single-digit range” with market conditions “conducive to supporting organic growth” above and beyond the rate gains.