Premium growth in Australia is predicted to moderate to about 6% this year after posting double-digit rises following the 2022 floods, S&P Global Ratings says. 

But the slowdown in premium growth is not expected to affect industry earnings even as insurers wrestle with higher claims settlement costs and higher reinsurance costs, the rating agency’s Asia-Pacific Insurance Sector Trends report says. 

“We’re expecting earnings across Australia’s property and casualty sector to benefit from the earn-through of higher premium rates,” S&P analyst Craig Bennett told insuranceNEWS.com.au. 

“A tailwind remains … the higher earnings on investments, reflecting higher interest rates, and the progressive realisation of bond values that had previously incurred unrealised valuation losses.” 

He says claims inflation is expected to slow in some lines, such as home and contents, but points out the easing in capacity and shortages of materials are being outweighed by higher labour costs. 

In motor, he says larger insurers have experienced continued inflation. “We continue to see some strengthening of reserves for prior period claims, which can indicate the severity of claims is higher than initially estimated.”   

The S&P report says the industry’s underlying return on equity should stabilise at 12-13%, excluding unrealised gains or losses on investments. 

It further adds reinsurance capacity will support underwriting growth and that it expects a sharper focus on technology as a risk and price differentiator.