QBE strengthens risk margin for potentially severe Australian BI scenarios
Re/insurer QBE has strengthened its provisions for Australian business interruption COVID-19 claims by $185 million after the UK’s highest court ruled in favour of policyholders in a landmark Financial Conduct Authority (FCA) test case.
The group’s total ultimate COVID-19 allowance is now $785 million, including total risk margins of $300 million, with FY20 COVID-19 related costs now expected to be $655 million.
The insurer said that it is taking additional "risk margin strengthening" to allow for "potentially severe Australian BI scenarios".
Following the UK Supreme Court ruling on January 15, the insurer revealed that the net cost of its UK insurance business interruption (BI) claims will remain unchanged at $70 million, but its gross cost of UK claims will increase as a result of the ruling.
QBE stated that although the UK Supreme Court ruling does not directly impact its net profit, the increase in gross UK insurance business interruption claims has the effect of utilising additional aggregate reinsurance limit thereby reducing downside protection with respect to potential Australian BI claims.
In order to restore that downside protection and to add a significant additional buffer, QBE has included additional $185 million risk margin strengthening with respect to potential Australian BI claims.
