QBE’s main cat reinsurance tower shrinks, aggregate cover restructured at renewal

QBE has revealed details of its reinsurance renewal alongside its results this morning, with significant changes evident as the main catastrophe excess-of-loss tower has shrunk, while the re/insurers aggregate reinsurance arrangement has been restructured.

For 2024, QBE renewed its main catastrophe excess-of-loss reinsurance tower and once again was able to maintain its attachment point at $400 million.

But the main catastrophe XoL tower now covers QBE to $2.7 billion, excess of that $400 million, although in placed terms it’s only $1.7 billion excess of the attachment for worldwide cat losses and then the next $1 billion covers US and ANZ events.

A year ago, the main catastrophe XoL reinsurance covered QBE to $3.1 billion excess of the same retention, placed to provide $2.1 billion of worldwide cover and the rest US and ANZ.

So this main cat cover has clearly shrunk year-on-year, with less protection higher up for QBE, which is a shift in strategy compared to other major re/insurers that have been buying more reinsurance protection for the tops of their towers.

On QBE’s aggregate reinsurance cover, there are also significant changes for 2024.

This year, the renewed catastrophe aggregate reinsurance provides for $300 million of cover excess of $500 million, but with a $75 million occurrence deductible for US wind and quake, plus all ANZ perils, plus a $25 million deductible for all other non-peak perils.

In addition, QBE’s aggregate reinsurance was only partially placed again this year, for the second year running.

The aggregate will attach much lower-down, but the changes to event deductibles will adjust how losses aggregate.

A year ago, QBE had $300 million of aggregate reinsurance excess of $1.1 billion, but only a $25 million event deductible across all perils and regions, so a potentially more responsive cover overall, despite the much higher attachment.

However, it’s challenging to compare the two and given the lower attachment, if there were an aggregation of larger US peak peril loss events, for example, then the aggregate reinsurance could actually attach more readily in 2024.

QBE’s catastrophe wrap reinsurance cover has also shrunk for 2024, to $150 million excess of $500 million, down from $200 million above the same attachment a year ago.

The catastrophe wrap is also restricted to certain perils this year, largely focused on US peak and ANZ losses.

But, it’s critical to note that, for 2024 QBE has increased the size of its quota share with its own reinsurance company Equator Re.

This year, the Equator Re quota share is now 52.5%, up from 50% a year ago and this will help to reduce volatility, especially from frequency perils and secondary peril type loss events.

Finally, QBE did not renew certain buy-down reinsurance covers this year, now going into 2024 without any of these arrangements within its reinsurance tower.