A new GlobalData report warns Australian home insurers of increased profitability risks as the advent of climate change-led weather-related claims compounds increasing insurance costs.

The report reveals that Australian property insurers’ loss ratios have pushed from 66.1% in 2019 to 84.6% last year, and expects loss ratios to stay above the 80% range for the next five years.

Property insurance claims are forecast to grow by more than 4% annually in the next five years, with GlobalData projecting insurers will pay out $7.3 billion in 2026.

The data analyst says the frequency of climate-related events has been the primary cause for the boom in insurance claim costs, noting significant payouts from severe flooding earlier this year in Queensland and NSW.

“Property insurers in Australia will have to walk a tightrope between profitability and customer retention as climate change and its associated risks become more prevalent over the coming years,” GlobalData Insurance Analyst Ashish Raj said.

GlobalData says reduced economic growth attributed to the pandemic has resulted in insurers significantly increasing premium prices, with some customers having their premiums increased by 300% upon renewal.

The report warns that some policyholders will be priced out of being able to afford premiums, likely leading to a noticeable increase in underinsured and non-insured properties, as the Climate Council of Australia projects 4% of Australian properties to be uninsurable by 2030.

“Insurers must also offer products considering the risk profile of geography to ensure that products for customers in low-risk zones are not overpriced,” Mr Raj said.