The liability insurance sector seems to be booming, according to recent data from the Australian Prudential Regulation Authority (APRA).

The number of risks being covered is up for most states, and premium income is growing in all regions of Australia.

But it is hard to work out what the claims are in this sector, because APRA has presented the data in a format only the regulator – or perhaps an actuary – could understand.

So while the liability insurance industry looks good from the income perspective, insuranceNEWS.com.au has no idea if it is profitable.

Let’s look at the positive side first.

The number of public liability risks written by insurers has grown in the nine years covered by the APRA report.

In 2003 the industry covered 1.7 million risks, rising to 2.36 million in 2011.

The biggest growth was in the booming mining states. In Queensland 296,143 public liability policies were written in 2003, growing to 483,221 last year.

It is a similar picture in WA, with 169,000 policies written in 2003, jumping to 232,200.

LMI Group MD Allan Manning says policy growth in the boom states is a reflection of the expanding mining industry.

“More companies are turning to contract labour in those states and that reflects the growth of public liability policies being written,” he told insuranceNEWS.com.au.

“There would be smaller policies being written to reflect the move away from covering the employer to covering the contractor.”

As would be expected, gross written premium in those states has risen sharply, while the traditional manufacturing states have seen premium revenue fall.

In 2003 insurers wrote $177.3 million of public liability premiums in WA and $283.4 million in Queensland. Eight years later WA generated $189.7 million of public liability premiums, while in Queensland $326.6 million of business was underwritten.

Moving to the older economies, in 2003 NSW saw $720 million of public liability premiums, with $440.8 million in Victoria. Eight years later NSW’s premium total had fallen to $574.9 million and Victoria’s was down to $399.2 million.

It is a different picture in professional indemnity insurance, with every state and territory reporting a dramatic rise in risks covered during the survey period.

In the ACT risks covered grew from 5095 in 2003 to 10,074 last year. In Victoria risks underwritten in 2003 numbered 38,334, rising to 107,482.

Queensland saw the number of risks covered triple and in NSW they doubled.

Dr Manning says the growth is due to the increasing number of people requiring professional indemnity cover.

“More people have become aware of professional indemnity cover and that is growing the market,” he said.

“We are also seeing smaller businesses, such as cleaning firms, now being required to obtain cover for all their workers, so again that is growing the number of policies. I also think brokers are now more comfortable selling professional indemnity cover.”

But policy number growth has not been reflected in premiums.

APRA reports gross written premium rose during the survey period, but not at the same rate as the number of risks being covered.

In Victoria gross written premium increased from $207.1 million in 2003 to $278 million in 2011. SA also reported modest premium growth, from $59.7 million in 2003 to $65.6 million last year.

Dr Manning says smaller individual policies have put pressure on premiums.

“Premiums have been coming down in professional indemnity, reflecting the claims record for the sector,” he said. “There is also a lot more capacity in the market and that again is putting pressure on rates.”

Which brings us to the claims data.

APRA has produced tables showing the number of claims spread over a nine-year period from 2003 to 2011.

The tables are based on claims reported and finalised, but there is no indication of when these two events have occurred.

Because liability claims can be settled many years after the event, it is not known if a contingency payment is included each year the claim is active, or if the settlement figure only appears in the year a payment was made.

insuranceNEWS.com.au asked APRA to explain how it came up with the claims figures, which in some cases exceed premiums paid in the year.

We do know insurers paid $1.4 billion of liability claims in 2011, but how that relates to claims generated that year is unknown.

An APRA spokesman told insuranceNEWS.com.au the claims figures are not easy to understand, so an analysis of liability insurance market profitability will have to wait until the regulator can expand on its own data.