Last year was extremely tough for Australian general insurers – and this one won’t exactly be a walk in the park.

But the fourth annual JP Morgan/Taylor Fry General Insurance Barometer says there are reasons to look on the bright side for 2016. The big question is, how bright?

There can be little doubt that the sooner last year is forgotten, the better.

A combination of large catastrophe losses and downward pressure on rates hit profits hard, resulting in significantly deteriorating combined operating ratios.

Globally, catastrophe levels were very low, but it was a different story in Australia.

El Nino generally brings more benign conditions, but not this time, with catastrophe claims above the 10-year average.

Excess capacity and strong competition conspired to put premium rates under strain, with domestic classes flat overall.

Domestic motor was down 2% compared with 2014, with householders up 1%. NSW compulsory third party (CTP) was up 2%, as was Queensland CTP.

The story was worse in commercial, with rates down 6% on average. Commercial property was down 10%, public and product liability down 7% and commercial motor down 4%.

WA workers’ compensation dropped 3%, with Tasmania, NT and ACT workers’ compensation down 6%. Professional indemnity rates fell 2%, and directors’ and officers’ was down 1%.

There was no better news from claims.

Domestic claims inflation tracked at 5%, with householders up to 7%, while commercial steadied at 4%.

Rate decreases plus claims increases can only equal trouble, in the form of “concerning” combined operating ratios.

Overall combined operating ratios deteriorated to 94% last year, compared with 87% in 2014.

Domestic classes deteriorated to 91% from 86%, with both domestic motor and householders at 97%.

Commercial lines blew out to 107%, compared with 91%, with commercial property deteriorating to a staggering 133%.

“[Last year] was a tough year on many fronts, with the weakening of combined operating ratios in both commercial and domestic classes presenting a very demanding environment for the Australian insurance sector,” JP Morgan Senior Insurance Analyst Siddharth Parameswaran said.

“We’re seeing slightly elevated claims inflation in 2015, with householders and NSW CTP standing out, suffering from higher frequency in the former and higher average claim size in the latter.”

Report respondents have outlined the major issues confronting the industry.

Unsurprisingly, 56% of underwriters identify “competition/rates/capacity” as their key concern, with 44% singling out “technology/cyber risk”.

About 86% of brokers identify an excessively competitive rates environment as the main issue, while 57% highlight pricing and profitability.

Reinsurers have flagged capacity and competition, followed by regulatory considerations and the overall investment environment.

Despite the grim year behind us, the report says moderate improvements are expected.

“Given the tough profit trends in 2015, we’re seeing consistency in the key concerns from underwriters, with the top issues remaining the same as last year,” Taylor Fry Principal Kevin Gomes said.

“But we’re looking at positive developments in both domestic and commercial classes for the coming year.”

Domestic rates are expected to go up 3% this year, with the decline in commercial easing to 3%.

Domestic combined operating ratios are expected to improve 1% to 90%, with commercial improving 6% to a forecast of 101%.

This is conditional, of course, on “a normalisation of catastrophe trends”, and the industry should be under no illusions.

There may be a few spots of light peeking through, but overall the tunnel is still pretty long, and pretty dark.