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BREXIT: Australian insurer QBE hit by fall in global confidence

Australia-based insurance company QBE has reported a 46% fall in its first half profit to $265 million, due to having to set aside $283 million for claims liabilities.19 Aug 2016

This is part of Out-Law's series of news and insights from Pinsent Masons experts on the impact of the UK's EU referendum. Watch our video on the issues facing businesses and sign up to receive our 'What next?' checklist.

The UK's vote to leave the UK has affected interest rates and market confidence, causing a fall in bond yields, QBE said in its half year results.

Brexit is unlikely to have much effect on the operations of the insurer, other than a "modest" increase in administrative costs if it has to reorganise its European business, it said.

"More significant is the impact of Brexit on global confidence and therefore on global economic growth prospects and investment returns," said chief executive John Neal.

"We have already seen bond yields fall significantly in the aftermath of the referendum outcome, contributing to an adverse discount rate adjustment of $283 million to QBE’s pre-tax profit for the half year as risk-free rates used to discount net outstanding claims decreased," he said.

A further downward step in global interest rates would reduce investment returns further for insurance companies, Neal said.

"However, if these lower investment returns provide a catalyst for the global insurance pricing cycle to turn, or at least stabilise, this may be a net positive for QBE," he said. 

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