Insurance pricing may have finally hit the bottom, according to Standard & Poor’s (S&P) – but don’t expect significant rises any time soon.

“Recent policy renewals indicate the soft pricing environment… may have peaked in Australia,” the ratings agency’s annual non-life insurance outlook confirms.

It will be music to industry ears – but S&P analyst Caroline Strahan tells insuranceNEWS.com.au that while stopping the slide will be a relief, there will be no immediate bounce back the other way.

Ms Strahan says insurers are reporting – for the first time in a long while – moderate price increases.

“They have also been able to maintain retention, which suggests competitors may be doing the same thing,” she says. “This has happened in personal and commercial lines, and certainly in commercial there was a sense that it couldn’t go any lower.

“But we are not expecting a particular hardening – more a stabilisation.

“The price increases were to cover input costs, it is more a case of treading water. They are also trying to avoid large price shocks further down the line.

“We don’t see it hardening any time soon – it would take a pretty unexpected turn of events.

“There is still a lot of capital out there. To move to a hard pricing environment, it would take a large catastrophe event.”

The report concludes the outlook for the industry is stable, despite challenging market conditions and limited investment opportunities.

“Australia’s non-life insurers have generally maintained solid earnings and strong capital levels in the past year, supported by long-term cost saving initiatives, lower reinsurance rates, and strengthened operational and pricing and underwriting capabilities,” it says.

“However, their ability to maintain earnings and respond to any further aggressive rate discounting is limited.”

Insurers’ operating performance has been sound, “albeit subdued”, and they remain under pressure from intensifying competition as new entrants, foreign capital and insurance subsidiaries of banks have made inroads into their traditional market base.

“While generally successful at retaining customers and stabilising policy retention levels, the overall result has been a stalling or contraction in their revenue over the past year.”

Insurers expected to remain most resilient are those with niche product sets, brand strength, diversified portfolios, less reliance on select intermediary relationships and access to strong parent group resources.

Ms Strahan believes that while competition from challenger brands is still intense, they are not discounting as they were in the past.

“It suggests that the market is acting rationally, it is not a time to be trying to grab market share,” she says. “The challenger brands still have a good customer proposition and brand awareness, but the majors benefit from customer inertia.”

S&P says general insurance aggregator websites will continue to struggle in Australia, mainly because major insurers refuse to participate.

“There is no pressure on the major insurers to take part,” Ms Strahan says. “And in other markets these sites have led to a greater focus on price at the expense of the product features a customer may need.”

Insurers appear to have ridden out the soft market, but do better times lie ahead?

S&P may believe the price decline has halted, but it is reluctant to put too much positive spin on the immediate future.

Asked whether Australia’s general insurers are well placed to push forwards, Ms Strahan tells insuranceNEWS.com.au: “I see them not getting worse.”

Not exactly inspiring – but a significant step nonetheless, because further falls would have really started to sting.