Australian insurers’ gross written premium is expected to grow by “mid to high single digits” as companies raise rates to cover increased claims and natural hazard allowances, Fitch Ratings says.

The ratings agency assigns a neutral outlook to the Australian life and non-life sectors, with regulatory capital positions to remain strong.

“Non-lifers will continue to focus on optimising their cost structures and underwriting efficiency while stable reinsurance expenses will support margins,” Fitch says in its 2025 Asia-Pacific outlook.

Catastrophe costs have been within allowances this year, and while extreme weather will determine pricing conditions for upcoming reinsurance renewals, market conditions have started to soften.

Fitch also expects insurers to explore alternative reinsurance solutions ahead of the Australian Prudential Regulation Authority’s proposed reinsurance-related capital reforms.

Stricter terms and conditions introduced during last year’s reinsurance renewals were largely maintained this year.  

“Higher net exposure due to frequent extreme weather events, changes to reinsurance structures or reduced reinsurance capacity pose risks for insurers’ capital and earnings,” Fitch says.

The report says investment performance is likely to moderate as reinvestment yields peak, while increased market volatility may affect returns.

The ratings agency has a neutral outlook for the wider Asia-Pacific insurance sector, reflecting stable operating margins and strong solvency buffers.