Soaring reinsurance premiums and an ever-increasing array of providers are among the “navigational hazards” facing insurers, according to leading actuarial consultant Jamie Reid.

Such issues will affect multiple lines of business, he told Finity’s niche insurer conference in Sydney.

Property premium rates, driven largely by higher reinsurance costs, have pushed premiums up 8% over the past financial year, compared with the norm of 2-5%, according to Mr Reid, a principal at Finity.

“We have seen strong premium rate growth in the property classes as insurers respond to weather losses and higher reinsurance premiums,” he told insuranceNEWS.com.au.

However, he says weather risks may be abating with the transition to an El Nino period, “which could see a move to… stronger profits”.

While motor insurance remains profitable, the cost per motor policy rose 4% while average premiums have risen only 2%. This suggests a slight contraction in margins.

“Motor is likely to remain profitable [but] the question is, for how long? Competition and greater use of aggregators is likely to squeeze margins in future.”

Mr Reid says new entrants continue to grow revenue strongly – albeit from a low base – with some such as Hollard and Auto & General profitable.

An increasing choice of providers, weaker customer loyalty and more shopping around will affect personal lines, producing “challenges in how individuals buy insurance”.

As for liability classes, the trend of falling premium rates and the inflation of claim sizes continues, bringing greater loss ratios, Mr Reid says.

“Insurers are also being challenged by the current low interest rate environment. It’s unlikely we will see increases in premium to offset lower investment returns.”

Mr Reid says each class has its own risks and other issues will emerge, with none likely to escape the impact of inflation, while another global financial crisis cannot be ruled out.