Reasonable economic growth and premium rate increases mean underwriting profits for Australian property and casualty (P&C) insurers are likely to be sound this year and next, a new report by S&P says.

The ratings agency’s latest Global Ratings report says reinsurance programs will moderate the effects of unexpected catastrophes, despite a claims spike last year.

Product lines for home and contents and domestic motor will continue to drive P&C insurer profits.

“Rate increases paved the way for top-line premium growth, and insurers managed their expenses well,” the report says.

“We foresee further rate hardening in commercial lines, albeit selectively introduced.”

Mortgage insurance premium growth will be subdued, as tighter lending standards and lowering house prices dampen the take-up of insurance.

In New Zealand the operating performance of P&C insurers “will likely remain solid for the next two years” despite continuing high levels of natural hazard claims.

Sound economic prospects should support both premium and volume growth, the report says.

“The relatively soft state of the global reinsurance market has assisted with both capacity and pricing in New Zealand despite 2017 being the costliest in terms of weather-related claims over the past 50 years.

“We believe reinsurers will remain active and offer capacity in the region, with primary insurers continuing to benefit from ample capacity at favorable pricing and terms and conditions.”