The Australian insurance industry is unlikely to rebound quickly from the impact of the coronavirus outbreak, London-based analytics company GlobalData says, amid warnings the local economy may experience its deepest slump since the Great Depression in the first half.

The firm says the local insurance industry will decline 1.3% to $114.1 billion this year from $115.7 billion, while the compound annual growth rate forecast for 2019-24 has been revised to 1.8%, compared to 4.2% previously.

Insurance Analyst Sangharsan Biswas says weaker consumer spending will hit vehicle sales and demand for motor insurance, while a halt in home auction activity will affect property insurance premium growth.

“New property sales will be on hold till the situation stabilises,” he says. “This adds to the pressure on the insurance industry’s profitability, which is already facing high claims from recent bushfires.”

Reserve Bank of Australia Governor Philip Lowe says the first half is likely to see the country experience the biggest contraction in national output and income since the 1930s.

“Whatever the timing of the recovery, when it does come, we should not be expecting that we will return quickly to business as usual,” he said in a speech webcast last week. “Rather, the twin health and economic emergencies that we are experiencing now will cast a shadow over our economy for some time.”

GlobalData says economic instability will have the longest impact on the industry internationally, with business closures affecting commercial lines and consumer disposable incomes falling.

Motor insurance claims are expected to fall dramatically as populations are restricted in their movements, while travel insurance claims are likely to reach record levels due to trip cancellations.

“Volatility in financial markets has raised the pressure on insurers’ balance sheets as exposure to corporate bonds has increased in recent years in search of better returns,” it says in a briefing released last week.