QBE de-risks exposure to reserves via $1.6bn transaction with RiverStone & Enstar

Australian insurer QBE has entered into a reserve transaction with RiverStone International and Enstar, that will de‑risk its exposure to reserves totalling approximately $1.6 billion, effective July 1st, 2024.

The transactions are expected to close during  Q2 2024, subject to regulatory approvals, and include all North America middle-market reserves up to June 30th, 2024.

It also includes remaining North America non-core long-tail reserves, not subject to prior reinsurance transactions, and a small number of other portfolios in International and North America where volatility and capital efficiency were motivating factors.

The reserve transaction will incur an upfront cost of approximately $85 million in Q2 2024 for QBE, split across the insurance operating result and restructuring and related expenses.

This reserve transaction will have a broadly neutral impact on earnings beyond, with an expected rise to net capital benefit of approximately $230 million, and increase QBE’s APRA PCA multiple by ~0.03x.

“This will provide an important level of earnings certainty regarding reserve risk from exited lines in North America, and will ensure the future earnings profile for the division represents the go-forward business,” says the insurer.

In aggregate, these reserves account for around 10% of QBE’s total net reserves, alongside other reserve transactions completed through recent periods.

The insurer has now de‑risked almost 20% of total long-tail reserves. Reserves subject to these collective transactions have contributed just over $1 billion of adverse prior-year development since FY 2020.

This morning, Enstar Group Limited confirmed that one of its wholly-owned subsidiaries has agreed to provide a ground-up Loss Portfolio Transfer (LPT) with certain subsidiaries of QBE, covering a diversified portfolio of US commercial liability and workers’ compensation business, largely underwritten on recently discontinued programs.

QBE released an impressive set of H1 2024 results recently, during which its profit more than doubled.

This website states: The content on this site is sourced from the internet. If there is any infringement, please contact us and we will handle it promptly.