The insurance industry reported a net combined ratio of 90% last year, and its total profit rose 81% to $5.45 billion as insurers recovered from 2011’s natural disasters.

The 121 insurers and reinsurers regulated by the Australian Prudential Regulation Authority (APRA) recorded gross written premium of $38.72 billion, up 8%, and saw their combined ratio recover after the 102% recorded in 2011.

Gross incurred claims fell 39% to $23.77 billion and, after reinsurance recoveries, net incurred claims were down 9% to $18.05 billion, according to APRA’s quarterly general insurance performance statistics bulletin.

The industry’s underwriting result was $3 billion, compared with a loss of $571 million in 2011.

APRA says net earned premium was driven by increases in short-tail lines and claims were down because of fewer catastrophes last year.

The industry’s net loss ratio was 63% – compared with 75% in 2011 – and within that, the loss ratio of 12 reinsurers fell to 33% from 90%.

Reinsurers’ net earned premium fell 3% to $1.34 billion and their net earned claims dropped to $447 million from $1.24 billion in 2011.

Insurers’ return on total assets rose to 5% from 3% and reinsurers increased their return to 5% from 4%.

Fire service levies collected by the states increased 18% to $1.49 billion, rising 22% in the December quarter to $402 million.

Insurers paid 8% more for reinsurance, at $9.65 billion, and recovered $3.55 billion from reinsurers, compared with $16.12 billion in 2011.

Commission revenue rose 12% to $791 million, while commission expense grew 7% to $3.2 billion. Investment income fell 3% to $5.17 billion.

The net loss ratio for household business fell to 56% from 75%, commercial motor vehicle dropped to 70% from 73%, domestic motor vehicle fell to 72% from 76% and fire and industrial special risks was 48%, down from 75%.

The loss ratio from compulsory third party motor vehicle fell to 88% from 103%, while public and product liability fell to 65% from 70% and employers’ liability was 84% from 100%.

Professional indemnity was the only sector in which the loss ratio grew, to 54% from 44%.

APRA says the industry’s solvency coverage ratio was 1.85 times the minimum capital requirement at December 31, up from 1.76 times due to fewer catastrophes.