Year-on-year premium increases have not been enough to restore profitability in householder insurance, actuarial consultancy Taylor Fry warns in its latest Radar report.

There was a 6% increase in the last financial year, but the class remains a “major challenge for insurers”, the report says.

The FY21 combined ratio was 103%, up from 101% in FY20, with catastrophic losses continuing to impact profitability.

Taylor Fry says affordability is a growing issue, leading to underinsurance, and COVID-induced supply issues have added to cost pressures for insurers.

“Climate change will increase the frequency and severity of catastrophic losses in future, placing further pressure on premium rates and on affordability,” the report says.

“The solution will require a holistic approach to mitigation with government, insurers, homeowners and corporates working together to focus on long-term benefits.

Across all lines, the last financial year was “improved” with net profit after tax increasing 17.6% on the previous financial year, but the industry continues to face significant challenges.

The report highlights wide-ranging impacts from COVID and other pressures “from the ongoing positive effects in motor, to the risk of increasing mental health claims in workers’ compensation and the significant insurer obligations towards improving customer outcomes across all lines”.

“Add to this the shockwaves of the IPCC climate report, cybersecurity concerns for directors and officers, and the urgency of affordability – as householder premiums continue to rise yet the class remains unprofitable – and it’s clear the challenges are complex,” Taylor Fry Principal Win-Li Toh said.

“Rising to them will require depth, insight and agile thinking.”

The Radar report provides class-by-class analysis, and can be accessed here.