Australian insurance giants to raise premiums

Two of Australia’s biggest insurance companies are increasing their premiums in the wake of compensation claims arising from a series of natural disasters in the last six months, including Monday’s magnitude-6.3 quake in Christchurch.

QBE says that substantial price increases are being implemented on products affected by catastrophes in recent months. It says that as a result of the “unprecedented level of catastrophe claims in the current half” — from disasters including floods and earthquakes in Christchurch and Japan — its profit margin for the first half to 30 June would be lower than it was in the first half last year.

In a statement, QBE says that its profit after tax is likely to range from US$660 million to US$704 million for the six months ending 30 June. This would still be 50-60% higher than the US$440 million reported for the first half of 2010 because of improved investment income.

However, QBE group Chief Executive Frank O’Halloran says that achieving the company’s targeted 2011 insurance profit margin of 15-18% would be largely influenced by the level of large risk and catastrophe claims incurred in the remainder of the year. “Substantial premium rate increases on catastrophe-affected portfolios will assist the second half.”

Rival insurer, Insurance Australia Group, has revealed plans to introduce premium rises across its businesses. It says that the high number of natural disasters has put upward pressure on the cost of reinsurance. IAG Chief Executive, Michael Wilkins, says: “To counter the effect of these expected increases, we are putting price increases through in a phased fashion across the majority of our businesses.”