How QBE Re balanced its portfolio and what’s next

QBE Re is close to achieving its optimal portfolio mix, says managing director Chris Killourhy. Here, he tells us what this recalibration means for the company and the importance of partnerships to the business.

QBE Re remains 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 traditional property portfolio and while we’re still expanding in this important line, we continue to stress the need for appropriate attachment points. We’ve also begun to address a previous geographical imbalance by reducing our exposure in less well-modelled territories and selectively expanding in the US.

With the US now accounting for approximately 40 percent 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.

This 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 that have the scale, expertise and diversification to manage the underwriting cycle.

We have reduced volatility and created a reinsurance business that better complements our insurance activities. As highlighted in QBE’s most recent half-year results, QBE Re now accounts for 12 percent of the broader group’s net earned premium.

The quality of QBE Re’s cedant partners and their disciplined approach to underwriting helps us to manage the cycle. We are deliberately prioritising long-term sustainable relationships and portfolio balance over short-term tactical opportunities. 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 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, while their business must also align with our appetite. We’re also clear that our 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 made several key additions to our team, including Andy Richardson from Aeolus Capital Management as head of underwriting for Bermuda. We also 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 and health team led by Henry Brigstocke, formerly of Canopius. In addition, Alex Smith has joined 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 and performance.

Geographically, we will continue to seek growth opportunities 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 focused on above-average activity forecasts and Hurricane Beryl’s unprecedented early arrival as a Category 5 hurricane. Beyond property cat, the industry remains focused 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. We’re looking to the future with optimism.