Profits will continue to slide
Australian insurers’ profitability will continue to decline in the short term, according to the JP Morgan Deloitte survey.
It reveals profitability was static last year with a 94% combined ratio which is expected to worsen to 96% this year.
Overall, commercial rates fell 2% last year against 8% the previous year, while personal lines premiums increased 3% after a flat year in 2007. The survey provides yet more evidence that the insurance cycle is turning up.
The silver lining for insurers comes in the form of higher premium rates, with severe weather, falling profits, evaporating reserve releases and the economic downturn combining to point the insurance cycle upward.
Higher rates are forecast to wash through the balance sheet in 2010, when the combined ratio should improve to 93%.
JP Morgan Senior Insurance Analyst Siddharth Parameswaran says the industry remains in fair shape, but the financial crisis will have a mixed effect on individual insurers.
“Insurers have a mixed exposure to the financial crisis, and results will depend on that exposure,” he said. “We are seeing claim costs decrease in construction, but professional indemnity, workers’ compensation, directors’ and officers’ (D&O) and commercial property claims are likely to increase and put some strain on those insurers with higher exposures to these markets.”
It reveals profitability was static last year with a 94% combined ratio which is expected to worsen to 96% this year.
Overall, commercial rates fell 2% last year against 8% the previous year, while personal lines premiums increased 3% after a flat year in 2007. The survey provides yet more evidence that the insurance cycle is turning up.
The silver lining for insurers comes in the form of higher premium rates, with severe weather, falling profits, evaporating reserve releases and the economic downturn combining to point the insurance cycle upward.
Higher rates are forecast to wash through the balance sheet in 2010, when the combined ratio should improve to 93%.
JP Morgan Senior Insurance Analyst Siddharth Parameswaran says the industry remains in fair shape, but the financial crisis will have a mixed effect on individual insurers.
“Insurers have a mixed exposure to the financial crisis, and results will depend on that exposure,” he said. “We are seeing claim costs decrease in construction, but professional indemnity, workers’ compensation, directors’ and officers’ (D&O) and commercial property claims are likely to increase and put some strain on those insurers with higher exposures to these markets.”