The stability of Australia’s insurance sector has been confirmed by ratings agency Moody’s.

It says in its latest outlook that the Federal Government’s stimulus package, higher property values and low rate of claims have contributed towards the industry’s stable bottom line.

However, costs and productivity remain “major concerns”, particularly as the damage bill from recent hailstorms in Perth and Melbourne is counted. Moody’s says insurers are expecting nearly $2 billion in claims from the storms.

Moody’s Vice President Wing Chew says local insurers are on track to post higher profits provided more natural disasters don’t scupper the party.

She says the global financial crisis also underscored the effectiveness of Australia’s regulatory regime.

Earlier this year, the Australian Prudential Regulation Authority released figures showing a 73% increase in net profit after tax across the insurance industry in 2009. The big three insurers all posted improved results in their latest updates.