The profitability of the Australian property and casualty insurance industry is steadily recovering as it moves beyond significant natural disaster losses in 2011, Moody’s says.
The recent Brisbane storms will temper some of that improvement but relatively benign weather since 2011 has supported the insurers’ profits.
Frank Mirenzi, a Moody’s vice president, says insurers maintain relatively healthy balance sheets, with conservative investment risk profiles and low financial leverage.
Cumulative natural disaster losses in 2012 and 2013 totaled $1.7 billion, well below the $5.2 billion recorded in 2011 following the extreme weather events of Cyclone Yasi and severe flooding across Queensland.
“Weather conditions have been relatively favourable since 2011, resulting in a benign period of loss experience for insurers,” says Mirenzi.
However, a slowing in premium growth, rising competition for motor and home insurance clients, and low interest rates will challenge the industry.
“Recent data and industry surveys suggest that premium rates are softening as smaller competitors offer significant premium discounts to win business,” says Mirenzi.
The latest data from the Australian Bureau of Statistics indicates that the insurance price component of the consumer price index has fallen in every quarter since March 2013 and was 1.9% lower at June 2014 compared to March 2013.
This echoes the premium statistics released by the Insurance Council of Australia, which suggest that premium growth is slowing in the three key personal insurance products of motor, home and contents insurance.
Business Insider Emails & Alerts
Site highlights each day to your inbox.