Fitch expects to maintain Australian insurers’ ratings over the next two years, citing strong capitalisation and generally robust earnings.

The ratings agency also expects to affirm most ratings on New Zealand insurers.

Fitch says factors that could cause deterioration in the Australian insurance sector’s profile include an economic downturn and persistent, high catastrophe losses.

It expects non-life operations to maintain strong earnings next year because interest rates appear to have bottomed and equity markets have performed strongly.

“Conservative investment portfolios provide some scope for a reallocation to growth assets and higher-yielding fixed-income securities, without compromising credit profiles.”

Fitch says insured exposures have risen on strong national income growth, and have become more concentrated as more of the population lives in major cities.

However, reinsurance capacity is available and rates are likely to soften.

Fitch says it expects to maintain New Zealand ratings due to stronger capital ratios, reinsurance availability, a stronger regulatory regime and a solid economic environment.

General insurers’ profits should rise on lower catastrophe losses, repriced property portfolios offsetting higher reinsurance costs and better investment returns.

Fitch says higher premiums and a return to a more normal loss experience make New Zealand property risk attractive to reinsurers.