QBE Syndicate 386: 2019 and 2020 Year of Account Forecasts

Posted 09/08/2021 – Quick takes

QBE has released updated forecasts for the 2019 and 2020 years of account for syndicate 386.

Syndicate 386
The 2019 forecast range has deteriorated to between -1.2% and +3.8% of capacity (midpoint +1.3% profit). The previous forecast range was between +7.4% and +12.4% of capacity (midpoint +9.9% profit).
The 2020 forecast range has improved to between +18.8% and +23.8% of capacity (midpoint +21.3% profit). The previous forecast range was between +17.9% and +22.9% of capacity (midpoint +20.4% profit).

Alpha comment

The 2019 forecast range has deteriorated significantly following unfavourable loss experience on the 2018 year of account & prior years, with reported large loss deteriorations on the international liability and professional indemnity books. The previous quarter’s forecast included an element of release from the prior years, so this is a large swing the other way which requires further investigation. Each year, QBE undertakes two major reviews of their prior year reserves. It has often been the case the Q2 reserving exercise internally highlights some shortfalls in reserves which are often, at least partly, offset by releases from reserves on other accounts/years by the year end. Whilst we would not suggest this will definitely be the case this year, it is worth bearing in mind that QBE’s reserving exercises across the year do seem to be more aggressive at Q2 and more benign at Q4. However, we are investigating this further with QBE and we will report back when we have more definitive answers. The 2020 year of account has improved this quarter from an already exceptional profit forecast. We are advised that the deteriorations seen on the 2018 & prior years are not expected to impact the reserving of the account going forwards due to the significant remediation of the books already undertaken, together with rate increases achieved on the recent open years. However, we would have preferred a more cautious approach to issuing initial forecasts for the 2019 year of account, rather than having to be downgraded in ensuing quarters. We always prefer syndicates to under-promise and over-deliver, rather than the other way around.

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