Australian general insurers should achieve strong earnings this year if natural hazard claims remain moderate, according to Fitch Ratings.

The ratings agency will not make estimates, but it believes the industry will most likely enjoy a good year, with continued subdued investment earnings the notable blip.

“Earnings may rebound on lower natural hazard losses, but weak investment returns are likely to persist, notwithstanding some reallocation to improve yields,” Fitch says in a report.

“We believe insurers may further increase allocation to risky assets to support returns, though the capital/return trade-off limits a large-scale weakening of portfolio compositions.”

Insurers’ net investment return fell 47% to $2.2 billion last year compared with 2014, due to declining bond yields, the report says.

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