Munich Re Australia MD Heinrich Eder has warned insurers not to relax in the belief that the major impacts of the global financial crisis have been successfully dealt with.

"The underlying destruction of value through the crisis is providing plenty of challenges to the industry," he said in a keynote address to the CC09 Claims Convention in Sydney last week.

Mr Eder says major Australian catastrophe risks must be considered and dealt with by insurers, because value concentration is increasing and exposures are becoming "enormous".

Examples are a potential hailstorm in Sydney with losses of up to $10 billion, and a cyclone striking the Gold Coast. "We neglect to understand how much risk is there," he said.

As the global financial crisis continues to affect the industry's investment returns, insurance demand and premium growth, as well as the availability of capital and the cost of claims, Mr Eder says insurers should reduce their costs and increase premiums. They should also focus on their core products and markets, adopt a more cautious risk selection strategy and reduce exposures in some niche/innovative classes.

While rising claims costs are often blamed on recent increases in major natural catastrophes, Mr Eder says the industry mustn't ignore the increasing impact of more routine claims.

"These day-to-day claims take $100,000 here and $150,000 there," he said. "They eat into results if they are not controlled."