S&P Global Ratings says most property and casualty (P&C) insurers globally, including in Australia, have enough “pricing power” to achieve underwriting profitability this year.

Australian P&C insurers are benefiting from last year's premium rate hikes and some unrealised loss unwinding, tempered by higher reinsurance costs, recent catastrophic events, and claims inflation, the rating agency said in a new global outlook report.

S&P projects the Australian and New Zealand P&C sector will likely achieve a combined ratio of 96% this year, compared with a forecasted 92% last year.

In other developed Asia Pacific markets, S&P predicts Japanese P&C insurers’ earnings for this year will improve as “normalised” natural catastrophe losses and lower covid-related losses cushion rising auto claims losses.

In South Korea the sector is expected to benefit from improving pricing adequacy and tightening claims controls and in Singapore P&C insurers should benefit from weakening inflation.

“We expect that Asia-Pacific insurers will continue to increase their premiums and re-evaluate their reinsurance arrangements,” S&P says. “We expect a strong premium-rate increase to support earnings.”

S&P says the P&C sector globally will see its “pricing power and competitive positions tested”.

“Despite high inflation, we expect that the pricing power of most rated P&C insurers will allow for underwriting profitability in 2023,” the rating agency says.

S&P says 85% of rated insurers globally have stable outlooks and going forward it sees “ongoing” rating pressure for the US P&C sector, global marine liability, and Latin American insurance sectors this year.