As QBE Re comes close to achieving its optimal portfolio mix, we look at what this recalibration means for the company and the importance of partnerships to the business.
At QBE Re we’re in growth mode but we will not allow this desire for expansion to undermine the work we have done to optimise our portfolio. We have worked hard to balance our portfolio by client, geography and product.
We have built a diverse mix of business to complement our traditionally strong Property portfolio and while we’re still expanding in this important line, we continue to stress the need for appropriate attachment points across the globe. We’ve also begun to address a previous geographical imbalance to reduce our exposure in less well modelled territories and selectively expand in the US.
With the US now accounting for approximately 40% of our premium and property at approximately a third of our book, we are close to achieving what we see as an optimal portfolio mix for QBE Re.
Importantly, our portfolio recalibration has led to an increased weighting to global and large insurers, with whom we partner on a cross-class and sustained basis. We see this segment accounting for approximately two thirds of our portfolio and are looking to further grow with those cedants we see as having the scale, expertise and diversification to be able to manage the underwriting cycle.
The strategy has reduced volatility and created a reinsurance business that better complements our insurance activities. As highlighted at QBE’s most recent half year results, QBE Re now accounts for 12% of the broader group’s net earned premium.
The quality of our cedant partners and their disciplined approach to underwriting helps QBE Re to manage the cycle. We are deliberately prioritising long term sustainable relationships and portfolio balance over short-term tactical opportunities. Our enhanced analytics mean we are well-placed to establish the sufficiency of premium rates. However, as a rule, we are not interested in materially ramping up or down in a particular line or geography based on rates at any given point in time. Instead, we look for financially stable, collaborative cedants who are consistent, long-term buyers of reinsurance and who also see reinsurance as a strategic purchase. We feel this is the right approach for our cedants and capital providers alike.
In the current elevated loss environment, cedants’ claims and risk management practices are a critical factor in our choice of partner. In addition, cedants’ business must align with our own appetite, and portfolio strategy. We’re also clear that our own product suite must match the needs of cedants to create an enduring partnership that adds value.
Part of this is a commitment to multiple platforms including Bermuda, Brussels, Dubai, Dublin, Lloyd’s, and New York - and to resourcing them with specialist underwriting talent.
As we prioritise portfolio analytics, we have recently complemented our existing strong underwriting bench with several key additions. We recruited Andy Richardson from Aeolus Capital Management as Head of Underwriting for Bermuda. We have brought in Carmen DeSilva as Vice President and Specialty Underwriter to expand our footprint on the island, and James Anfossi as Assistant Vice President and Underwriter to focus on analytics-led property underwriting.
In London, we’ve built out our Accident & Health team led by Henry Brigstocke, formerly of Canopius, augmented by three new hires. In addition, Alex Smith has joined us in London as Head of International Casualty after more than two decades at Swiss Re. We have also appointed Ash Ahluwalia to the new role of Global Head of Portfolio & Performance, leading a team of analytical professionals.
In the future, we do not rule out adding products in the credit and structure solutions space but, maintaining the balanced portfolio that we have worked hard to construct is our guiding light.
Geographically, we will continue to seek opportunities for expansion but remain committed to restricting capacity to risks we can understand and model. The US market remains a focus, with attachment points sensibly positioned to allow reinsurers to properly understand assumed risk levels and somewhat insulate reinsurers from attritional losses/secondary perils which naturally sit better in the insurance space.
Approaching peak hurricane season, the reinsurance market was appropriately focussed on above-average activity forecasts and Hurricane Beryl’s unprecedently early arrival as a Category 5 hurricane. Beyond property cat, the industry remains focussed on social inflation, economic uncertainties, and geopolitical tensions. However, at QBE Re, we believe the balance we’ve achieved gives us genuine diversification and protection from the impact of the now much quoted, “unprecedented” losses that the market experiences. We’re looking to the future with optimism.
