QBE is bracing for a wave of claims from banks and other mortgage lenders as the financial impact of COVID-19 on home borrowers becomes clear in the next six months.
In an ASX filing on Wednesday, the country’s second largest provider of lender’s mortgage insurance said that total costs relating to the pandemic were estimated to be around A$600 million over the next 18 months.
QBE estimates that more than a third of the figure is attributable to an expected blowout in claims for trade credit and LMI policies.
“While the landscape remains highly uncertain, at this stage QBE currently estimates total COVID-19 related costs to be around $600 million pre-tax,” the company said in the filing.
“This includes around $265 million of potential further net claims that could emerge over the next 12-18 months, primarily in trade credit and LMI, but also in casualty (including D&O), accident and health, landlords’ insurance and other classes.”
QBE has been carefully managing risks on its LMI book this year as the pandemic crunched activity in key parts of the Australian economy.
In April the insurer began notifying home lenders that it had suspended mortgage insurance coverage for new loans taken out by home buyers employed in the industries hard-hit by COVID-19.
This meant that lenders such as Auswide Bank were unable to secure LMI to cover against the risks of lending to borrowers working in the tourism, hospitality and fitness sectors.
QBE scrip closed up 16 cents or 1.6 per cent to $9.83 yesterday after insurance analysts highlighted the solid underlying performance of most of its insurance operations.