The general insurance industry suffered a 28.3% fall in net profit after tax to $1.1 billion for the year to March 31, as provisions for business interruption (BI) claims and natural catastrophe losses combined to blunt earnings, according to figures released today by the prudential regulator.

Impacts from the COVID-19 operating environment and lower investment income also contributed to the weaker results, the Australian Prudential Regulation Authority (APRA) says in a regular update.

APRA says the industry reported “large” gross incurred claims from the Halloween hailstorms and severe flooding in NSW and Queensland, which were declared a catastrophe by the Insurance Council of Australia.

Additionally “significant” provisions for BI claims made in the December quarter also pushed up gross incurred claims.

But these increases were offset partially by falls in domestic and commercial motor claims costs, the result of lower levels of vehicle usage during parts of last year when COVID restrictions were in place.

Overall, gross incurred claims for the year declined 1.9% to $41.5 billion from a year earlier.

Gross earned premium rose 4.1% to $53.1 billion, supported by rate increases in householders, domestic motor, fire & industrial special risk and professional indemnity classes of business.

APRA says the increase in premiums was in response to rising claims costs in these classes.

Underwriting earnings grew 6% to $1.6 billion and investment income dropped 20.8% to $1.6 billion.

For the quarter to March 31 the industry returned to profitability with a net profit of $19 million. In the preceding quarter the industry lost $622 million.

Click here to access the report.