QBE, the global re/insurer, sees alternative reinsurance capital as an important lever to allow the company to deliver sustainable returns in the mid-teens, according to its CEO Andrew Horton and CFO Chris Killourhy, with recent catastrophe bond and casualty sidecar initiatives seen as early deals to help in building a profile within ILS markets.
One of the key themes resonating through the QBE Group results announced today and the firm’s earnings call, was the topic of “capital efficient growth.”
Reinsurance capital is part of that, naturally and as we reported earlier QBE continued to make strides in improving its catastrophe reinsurance protection at the January renewals.
But alongside this and for the first time, the company has highlighted “alternative capital” as a lever for more capital efficient growth that can support delivery of sustainable returns to its shareholders.
We’d suggest this is a further evolution of QBE’s embrace of insurance-linked securities (ILS) investors and the capital markets for more than simply hedging capacity, being now seen more as complementary, or even partnership capital, that can efficiently help the QBE balance-sheet be both more resilient and more predictable, when it comes to delivering what its shareholders want to see – sustainable returns.
Over the last year QBE has ramped up its use of alternative and ILS, or third-party capital within its business.
Notably, this included sponsoring its largest catastrophe bond to-date, securing $400 million of international peak peril reinsurance from the Bridge Street Re Ltd. (Series 2025-2) issuance back in December 2025.
It was the second catastrophe bond in a year from the company, having sponsored the $250 million multi-peril Bridge Street Re 2025-1 cat bond in January last year as well.
It’s worth highlighting that the first cat bond for QBE was to protect its internal reinsurers, so does not feature directly in its main catastrophe reinsurance tower in the same way the December issuance does.
But those were notable first tests for QBE’s appetite for catastrophe bond coverage and earlier today the firm’s CFO said the cat bond cover helped in bringing down reinsurance costs somewhat, another positive.
The next notable use of alternative capital and ILS structures was, of course, the well-publicised casualty reinsurance sidecar arrangement, the $550 million plus George Street Re arrangement.
That first casualty ILS transaction for QBE deepened its partnership with third-party investors significantly and provides another lever for capital efficiency in the firm’s reinsurance business.
Across both of these initiatives, cat bonds and casualty sidecar, QBE sees alternative capital interactions as one of its three levers for driving sustainable and capital efficient growth.
The company acknowledges this broadening and diversification of its capital sources, now deserving of featuring within both investor presentations and senior executive commentary.
“With a focus on driving more capital efficient growth, and greater capital diversification, QBE recently announced a catastrophe bond providing $400 million of collateralised reinsurance, alongside a casualty sidecar for QBE Re,” the company explained in its investor documents this morning.
These moves “enhance” both the efficiency and diversity of the QBE capital base, while acting as levers alongside its own balance-sheet capital to help in delivering those sustainable returns.
QBE continues to explore alternative capital solutions, the company said today and comments from its CEO and CFO underscore that this is now seen as a permanent, or long-term opportunity, so not just a response to market cycles.
QBE’s CEO Andrew Horton noted the increased appetite for partnering with alternative capital as he commented during this morning’s earnings call, “We’ve historically had limited alternative capital in our business. As these markets and investors have evolved, we do see opportunities from both a cost-of-capital and capital efficiency perspective.
“This can be an important lever for us as we strive for sustainable mid-teen returns, particularly where we can build long-term strategic partnerships.”
Chris Killourhy, Group CFO of the re/insurer, provided more detail into how the company now thinks about these arrangements.
“I did want to expand on Andrew’s earlier comments about alternative capital. Following the launch of QBE Re’s first cat bond in 2025, the 2026 bond has broadened coverage to the whole group, attaching now at $800 million. The bond provides greater certainty around the availability of capacity, while also reducing our overall cost of capital,” Killourhy explained.
“We also launched a casualty sidecar on the QBE Re casualty portfolio. As you know, you can think of the mechanics of a sidecar as similar to that of a quota share, and we’ve effectively quota shared around one-third of the casualty reinsurance portfolio for the 2025 underwriting year.”
Killourhy continued, “In effect, this allows QBE to swap underwriting risk for fee income, enabling us to recycle capital, manage reserve risk, and ultimately support more capital efficient growth.
“These are early transactions as we build our profile in these markets, but I do see this space as important, as an important lever for QBE as we calibrate the business to deliver sustainable mid-teen returns.”
The messaging is clear, that alternative capital is now seen as a mature and stable capital source that can lever and add efficiency to the QBE business.
Finally, Killourhy also provided some insight into how QBE thinks about the capital efficiency benefits from the casualty sidecar, saying, “The size of the sidecar is in the region of $450 million. I think a way of thinking about the cycle, the benefits we get, the ratio is roughly sort of 1 to 3 in terms of premium to capital. But where we really see the capital benefit potentially coming in is in outer years as reserves build up, and we bring more years in.”
