The Australian general insurance industry performed strongly last year, achieving an 11.2% surge in property and casualty (P&C) premiums to €32.1 billion ($48 billion) from 2020, Allianz says in a new report.

Allianz predicts P&C premiums will increase to at least €49.1 billion ($73.5 billion) by 2032, representing growth of about 3.9% on a compound annual basis over the next 10 years.

A spokesperson for Allianz says the 11.2% expansion last year marks “the fastest increase this century” and expects growth this year will “normalise” to about 5.1%.

The spokesperson tells insuranceNEWS.com.au for property risks, the frequency and intensity of natural catastrophe events over recent years such as floods and bushfires is "putting upward pressure on reinsurance and insurance premiums”.

“This is exacerbated by claims cost inflation from supply chain constraints, leading to increases in the cost of building materials, as well as shortages in building trades arising, for example, from increased building activity encouraged by government support for new home building in response to the earlier covid-induced economic slowdown,” the spokesperson said.

“Supply chain constraints are also putting upward pressure on motor premiums arising from delays in the delivery of new vehicles, and the flow on to higher used car prices, key components such as computer chips, and increases in the price of vehicle parts.”

In the Global Insurance Report released last week, Allianz says last year the P&C market globally expanded 6.3% to €1.7 trillion ($2.5 trillion), powered by the US and Europe.

For this year P&C premium is forecast to grow 4.6% globally and also by a similar margin each year over the next ten years, the Allianz report says.

This year would have been “another bumper” one for the industry had it not been for the Russian-Ukraine war, the report says.

“The invasion of Ukraine has dashed those hopes.”

Looking beyond the war, the report says the next decade will be a “decisive” one for the industry, following covid and long-running challenges such as economic pressures from rising interest rates, climate change, cyber threats, extreme weather events and protection gaps.

“Despite the great uncertainties today – from the impact of the Ukraine war to the consequences of the interest rate turnaround and the continuing threat from Covid-19 – we are not too pessimistic about the more distant future,” the report says.

“After all, these uncertainties are precisely the breeding ground for demand for rising risk awareness; they reinforce the impact of the two megatrends of climate and demographic change, which will continue to be the main drivers of demand for risk protection.”

Click here to access the report.