Climate change risk is the “new normal”, Group CEO Pat Regan says in QBE’s annual report, released today with its FY19 results showing 41% rise in consolidated group FY19 profit after tax on FY18, to $US599m ($A817.9m) and 1% drop in revenue to $US15.2bn.

Regan said while business had been affected by low economic growth across major economies, generally low unemployment, interest rates at record lows and disruptive influence of technology, the climate change challenge to customers and the whole economy had been “most profoundly” felt.

“Globally, the economic costs from natural disasters have now exceeded the 30‑year average for seven of the last 10 years, while the number of extreme weather events globally has tripled since the 1980s. In 2019 alone, we saw examples of this,” he said.

“The obvious link between these events and the changing climate brings into sharp focus how climate‑related risks are now the new normal for our industry. We must take action to (tackle) these risks in our own operations, at the same time as supporting our customers to mitigate their exposure to climate risks and support the transition to a lower carbon economy.”

QBE planned to continue to adjust its catastrophe models for a broader range of weather phenomena and geographies and participate in developing scenario analysis as part of the UN environment program finance initiative’s principles for sustainable insurance task force on climate-related financial disclosures pilot project.

Combined operating ratio (COR) of 97.5% was above the 94.5-96.5% target range, mainly because of adverse weather conditions, which severely affected its US crop insurance business, and significant Australian bushfire claims.

Australia Pacific gross written premium dropped 4.5%, to $US3.9bn – up 3% on a constant currency basis. Group CFO Inder Singh said the net cost of catastrophe claims fell to $US426m or 3.7% of net earned premium (NEP) compared with $US523m and 4.4% on FY18.

That was below QBE’s annual allowance and the adverse catastrophe experience in Australia Pacific was “more than offset by relatively benign experience” in international operations and in North America, to a lesser extent.

The overall net catastrophe claim costs fell 18.5% to $US426m or 3.7% of NEP compared with 4.4% in FY18.

The group result included $US96m of positive prior accident year claims development (PYD) that benefited the claims ratio by 0.8% compared with $US113m and 1% in FY18.

Australia Pacific reported $US104m of positive PYD compared with $US129m, mostly reflecting favourable claim development on NSW CTP and with lower than expected average claim size after the SA CTP market’s privatisation. But that was partly offset by minor adverse development in householders, public liability, engineering and NZ.

Despite the devastating impact of catastrophes on its customers, Australia Pacific recorded a 90% COP – down from 90.8% in 2018. QBE said positive pricing momentum and the continuing benefits of cell reviews and its “brilliant basics” pricing initiative, contributed to another 4.2% improvement in the attritional claims ratio.