Revised provisions for pandemic-related business interruption (BI) claims and the growing financial hit from natural catastrophes pushed the general insurance industry into underwriting losses last year, according to the Australian Prudential Regulation Authority (APRA).

APRA says the industry made an underwriting loss of $78 million, compared with a $2.3 billion profit in 2019. Net profit after-tax fell sharply, declining by 98.9% to $35 million.

When assessed on a quarterly basis, the industry made a $1.1 billion underwriting loss for the three months to December 31. It had an underwriting profit of $1.1 billion in the preceding September quarter. The December quarter also produced a net loss of $649 million, versus an $836 million net profit for the September quarter.

“The result was driven by natural catastrophe claims costs, provisions for BI claims, and falls in investment income,” APRA says of last year’s results in its latest industry update.

“Gross incurred claims costs were significantly higher during the year with the recognition of COVID-19 related BI provisions.

“Claims costs from catastrophic bushfires and storm events, and a large strengthening of long tail claims reserves, were also major drivers.”

APRA says the December losses stemmed predominantly from increased provisions for COVID-related BI claims. Other significant contributing factors in the quarter were increased short-tail property claims costs from a southeast Queensland hailstorm event, and claims reserve strengthening across several classes of business including mortgage and public and products liability.

Gross earned premium increased 5% to $52.6 billion last year but gross incurred claims rose at a faster pace, going up 23.7% to $47.2 billion. The trend was played out in the December quarter as well. Gross earned premium grew 3.3% to $13.6 billion while gross incurred claims advanced 59.7% to $14.4 billion.

Investment income last year fell 48.8% to $1.7 billion and for the December quarter dropped 19% to 507 million .

The APRA data is based on input from 93 insurers.