Insurers holding firm, says KPMG
Results for Australia’s four large insurers for the six months to December 31 2008 reflect the underlying strength of the sector and positive effect of post-HIH regulation, says international consulting firm KPMG.
Its General Insurance Industry Survey for the six months to December 31 says insurers’ profit after tax for the period was $1.31 billion – down 11% on the corresponding period in 2007.
The underwriting result was a loss of $866 million compared with a surplus of $750 million for the same period in 2007 – although total investment revenue was up 75.1% at $2.52 billion.
KPMG’s insurance sector head Brian Greig says the insurance industry has thus far navigated the global financial crisis due to its strong solvency position, a focus on underwriting coupled with a conservative approach to investments and by closely matching assets and liabilities to mitigate the effects on interest rate changes.
He says insurers can no longer view extreme weather events as “one-offs”, and will continue to re-price risk accordingly.
The company points to weather events in 2007 which accounted for more than 30% of all general insurance claims that year, compared with 12.3% in 2000. The years 2008 and 2009 will no doubt show a similar story, it says.
Mr Greig said insurers are well provisioned to deal with weather-related claims, although they will be continuing to price risk carefully.
“It’s clear that any repricing will trend upwards, particularly given the recent losses from the storms and bushfires which will be included in the full year reporting,” he said.
“However, it is important to consider that this is essential for insurers to fulfil their main role, which is to protect the assets of their policyholders.”
Mr Greig says the Victorian bushfires have brought to the surface issues of inequity in underinsurance and non-insurance.
Up to 75% of the Victorian fire services’ budget is levied on insurance policyholders, but the services are available to all.
He says an alternative approach would be to levy all property owners, not just those with insurance coverage.
“Personally, I’d advocate it and I know it has been a point that rises to the surface and then disappears,” Mr Grieg told insuranceNEWS.com.au. “I had heard that it may well be part of the [bushfires] royal commission once the terms of reference are determined.”
Its General Insurance Industry Survey for the six months to December 31 says insurers’ profit after tax for the period was $1.31 billion – down 11% on the corresponding period in 2007.
The underwriting result was a loss of $866 million compared with a surplus of $750 million for the same period in 2007 – although total investment revenue was up 75.1% at $2.52 billion.
KPMG’s insurance sector head Brian Greig says the insurance industry has thus far navigated the global financial crisis due to its strong solvency position, a focus on underwriting coupled with a conservative approach to investments and by closely matching assets and liabilities to mitigate the effects on interest rate changes.
He says insurers can no longer view extreme weather events as “one-offs”, and will continue to re-price risk accordingly.
The company points to weather events in 2007 which accounted for more than 30% of all general insurance claims that year, compared with 12.3% in 2000. The years 2008 and 2009 will no doubt show a similar story, it says.
Mr Greig said insurers are well provisioned to deal with weather-related claims, although they will be continuing to price risk carefully.
“It’s clear that any repricing will trend upwards, particularly given the recent losses from the storms and bushfires which will be included in the full year reporting,” he said.
“However, it is important to consider that this is essential for insurers to fulfil their main role, which is to protect the assets of their policyholders.”
Mr Greig says the Victorian bushfires have brought to the surface issues of inequity in underinsurance and non-insurance.
Up to 75% of the Victorian fire services’ budget is levied on insurance policyholders, but the services are available to all.
He says an alternative approach would be to levy all property owners, not just those with insurance coverage.
“Personally, I’d advocate it and I know it has been a point that rises to the surface and then disappears,” Mr Grieg told insuranceNEWS.com.au. “I had heard that it may well be part of the [bushfires] royal commission once the terms of reference are determined.”