The insurance industry has had two years of record profits and favourable conditions, but the good times won’t last forever, according to JP Morgan analyst Shane Fitzgerald.

He says mainstream media reports of industry profits peaking amid signs of a downward swing in the cycle are accurate. While insurers’ results have been impressive, “there are signs the industry is starting to slow down”.

“Its stellar performance has come about from a combination of positive influences like market concentration and benign weather conditions,” he said. “But I’d expect that increased market competition – which we’re already seeing evidence of – will eventually have an effect on insurers’ bottom lines.”

He says the industry also needs to remember recent rate reductions will take up to 18 months to have an effect on results.

KPMG insurance partner Andries Terblanche told Sunrise Exchange News there is some pressure on insurers to drop commercial lines prices, but it is “unlikely the industry will revert back to the old cycle”.

“About 80% of Australian insurers are listed, and shareholders take an active interest in ensuring their interests are looked after,” he said. “I think there are also more checks and balances in place in the industry, and the regulators monitor this kind of thing very closely.”

He says while the past three years have been “full of promise for the industry” insurers are now wondering which way to head. “It’s very much a waiting game.”

Mr Terblanche says the industry has “learned its lesson from the regulator”, and if the old insurance cycle reappears it is likely the downward cycle will be less severe.

Despite recording impressive profits, leading insurers QBE, IAG and Promina experienced a drop in share prices only a day after recording their results.