Some commercial segments in Australia’s insurance market will probably see some “further rate hardening” as the broader property and casualty (P&C) industry enjoys moderate growth prospects, S&P Global Ratings says.

It says incremental rate rises are also in store for the personal lines market.

S&P says the local general insurance sector has low industry risk because of strong supportive elements including sound profitability and robust institutional framework.

“[It] has achieved relatively strong operating returns despite heightening competitive pressures and materially higher gross claims stemming from natural perils and catastrophe events,” the ratings agency says.

“We expect incremental rate increases achieved across both personal and commercial lines during [last year] will continue [this year] while sound reinsurance programs moderate the impact of larger claims and underpin a relatively sound underwriting performance.

“We do not expect any material change in risk appetite or the existing robust capital adequacy.” 

General insurers are expected to maintain a return on equity of above 10% over the medium term, backed by prudent risk-based pricing, selective rate increases, efficient claims services and continued cost management initiatives.

While the sector is exposed to domestic natural disaster perils, sound risk management and robust reinsurance arrangements have combined to moderate the impact of large claims and catastrophic events.