Claims losses from the bushfire catastrophe could dent industry profitability by 0.4 percentage points to 12.3% this financial year, research consultancy Ibisworld says in a report.

While reinsurance protection programs have capped a portion of the losses, Ibisworld expects reinsurers will probably raise their renewal prices, which could in turn force insurers to do the same to protect margins.

“Reinsurers are likely to increase premiums for underwriting in higher risk areas in Australia, which will affect the bottom lines of Australian insurers,” the report says.

“Ultimately, this has the potential to create upward pressure on insurance premiums as insurers seek to pass on these costs to maintain their profit margins.”

The upward price trajectory could last for the next five years, partly reflecting the challenges the industry is facing as extreme weather events increasingly become more frequent and severe.

Overall insurance claims, including this summer’s flood and hailstorm catastrophes, are expected to increase 1.8% in 2019/20, the research consultancy predicts.

The Australian Prudential Regulation Authority says insured losses from extreme weather events this recent summer are set to reach $5 billion.