General insurance sector profitability bounced back from the lows of 2008 to top $3.086 billion last year.

But while the latest figures from the Australian Prudential Regulation Authority (APRA) tell a story of improving health to the end of December last year, they leave out a deluge of claims that marked the first half of 2010, including nearly $2 billion arising from the Perth and Melbourne hailstorms.

Figures for the first half of 2010 won’t be available until December, but based on early estimates the result will be far worse than the collective underwriting loss of $513 million lodged in the first half of 2009.

Ongoing problems with professional indemnity (PI) cover have also been highlighted in the report; it is the only class to experience a fall in business in 2009.

The insurance industry regrouped in the second half of 2009 to post an underwriting profit of $1.893 billion, a huge upswing on 2008 when there was an underwriting loss of $21 million.

While underwriting profitability is up on 2008, it remains 41% down on 2007, despite net premiums rising by 10% over the same period.

Gross claims remain high at $23.3 billion, falling by $2.5 billion since 2008.

Gross premium revenue rose 7.8% in 2009 to $27.4 billion, with the largest increase coming from compulsory third-party motor vehicle at 13.6%. The industry’s two largest classes of insurance, domestic motor vehicle and householders, saw premium climb by 9.6%.

All classes of commercial risk insurance experienced rises in gross premium revenue except PI, which fell by 10% to $1.335 billion as wary insurers recoiled from writing new business.

PI insurance has been under the squeeze for some time, particularly for the financial planning industry, with a variety of factors making underwriters wary of the risks. These include a surge in global financial crisis-related claim notifications and a wariness of exposure to collapsed funds.

Australian state and territory-owned general insurers paid $326 million on more than 10,000 claims for PI and public and product liability insurance in 2008, according to figures released by APRA earlier this year.