MELBOURNE, Australia--QBE Insurance Ltd. (QBE.AU) has flagged its earnings will be dented by what it expects will be the costliest year in the history of the global insurance industry following earthquakes in Mexico and Atlantic hurricanes.
In a statement Tuesday, the Australian insurer said it had increased its 2017 allowance for large individual and disaster claims to US$1.75 billion, which is expected to impact pre-tax earnings by about US$600 million.
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It follows Cyclone Debbie which hit Australia earlier in the year, Hurricanes Harvey, Irma and Maria in recent weeks which caused extensive damage in the Caribbean, Gulf of Mexico and Florida and the Mexican earthquakes.
The warning weighed heavily in QBE's shares, sending them down more than 5% in early trading to the lowest levels in 11 months.
The three consecutive major hurricanes in recent weeks are likely to cause widespread losses for insurers, although the extent of damage is still unclear, especially in Puerto Rico following Hurricane Maria this month.
The global insurance and reinsurance industry's worst-ever year was 2011, when companies paid out an inflation-adjusted US$137 billion following a tsunami in Japan, earthquakes in New Zealand, floods in Thailand and tornadoes in the U.S., according to Barclays.
There remains a high degree of uncertainty over the more recent natural disasters and QBE Chief Executive John Neal said it was too early to speculate how much reinsurance and insurance pricing would rise, though the company was well placed to benefit from rising prices as much of its reinsurance for 2018 had already been purchased.
The total cost of disasters and large individual claims was fairly steady for QBE in 2016 at US$1.06 billion, and net profit rose 23% for the year to US$844 million. However, the company warned in June of a significant rise in claims in its emerging markets operations, including an increase in the frequency of medium-sized claims in Asia and weather-related claims in Latin America.
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(END) Dow Jones Newswires
October 02, 2017 21:13 ET (01:13 GMT)