QBE’s insurance premiums will increase by seven per cent in 2012 and continue to climb into 2013 as the insurance giant tries to recoup the cost of disasters in Australia and overseas.
And people living in northern NSW, Victoria and far north Queensland may soon have to turn to other insurers to cover their homes as QBE cuts its coverage to some areas.
It comes after a series of huge storms and widespread floods in eastern Australia over the past 18 months which have hurt the company’s bottom line.
QBE believes catastrophic weather events in Australia are becoming more common and insurance premiums will continue to climb.
“Despite seeing heavy price increases we still think the exposure is very significant in northern NSW and particularly up in far north Queensland,” incoming chief executive John Neal told reporters.
“So if we don’t think we can get the right rate for the risk then we will reduce our exposure, and we have reduced exposure.”
The company has done the same in the mid west in the United States which has been particularly exposed to tornadoes.
As premiums increase by seven per cent across Australia, QBE believes people in flood-prone districts will still be able to purchase cover.
“We see the rate increases continuing in 2012 through 2013,” Mr Neal said.
“We don’t see any lack of capacity to sit there and provide insurance for those communities, so we don’t see uninsurance or lack of availability with insurance being an issue.”
QBE says reinsurers have tightened their pricing and conditions as the company notes an increased frequency in catastrophic activity.
“Whether that’s down to climate change or whether that’s down to the climate cycle or whether it’s down to urbanisation I don’t think it’s for us to judge,” he said.
“What we do recognise is there is a likelihood of increased catastrophe activity in areas where people require insurance.”
QBE has faced a difficult four years since the beginning of the global financial crisis but it says the outlook is improving.
The company produced a “superb” start to the first quarter of 2012, with insurance claims totalling $700 million less than the same quarter last year, Mr Neal said.
QBE needed to design its pricing and purchasing of reinsurance to protect against repeated catastrophes.
“For us it’s a reality and we need to address it,” Mr Neal said.
Outgoing QBE chief executive Frank O’Halloran will hand over the reins to Mr Neal on August 17 after 36 years with the global insurer.
The overall cost increase for reinsurance was about 7.5 per cent in 2012, Mr O’Halloran said.
“We would expect that to be lower coming into the 2013 year,” Mr O’Halloran said.
