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QBE Calms Fears Over BP Rig Disaster Cover

Source: The Australian

Posted on 03 Jun 2010

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QBE has moved to calm investor concerns about its exposure to the BP oil rig catastrophe by stressing it has significant reinsurance protection to cover large claims.

The company's share price has been hammered over the past month, down about 15 per cent since the middle of April, in part because some investors fear its exposure to the oil rig disaster in the Gulf of Mexico may be huge.

Analysts estimate the insured losses from the accident could be as high as $US12 billion ($14.1bn).

QBE said yesterday the market update it provided at the end of April on large individual risk and catastrophe claims included its maximum net exposure to claims on policies exposed to the oil spill.

On April 28, the insurer said its estimated large risk and catastrophe claims -- net claims of $2.5 million and above -- for the year to date were $470m, compared with $430m for the same period last year.

Catastrophe claims this year have included the oil rig loss, the Haiti earthquake, Chile earthquake, a Melbourne hail storm, Iceland volcano travel claims, European windstorm Xynthia, Queensland cyclone Ului, the Perth hail storm, Western Australia earthquake and US tornadoes.

QBE said it had a $1.28bn allowance to cover claims of this nature, including reinsurance protection of $180m for claims above $1.1bn.

The company's shares rose 44c, or 2.36 per cent, to close at $19.07 yesterday.

Eight days ago almost half the syndicates in the Lloyd's of London insurance market, including QBE Underwriting, launched legal action against BP, attempting to block efforts by BP to claim on cover held by Transocean, the rig operator.

QBE also said yesterday it had reviewed its reserves for British motor liability claims and confirmed that what it held at the end of December was adequate.

This follows Wednesday's announcement from competitor Insurance Australia Group it expected to recognise a one-off pre-tax charge of about $365m in the year to the end of June due to a surge in injury claims in its British motor insurance business.