Insurers’ risk margins are in line with expectations, according to APRA.

Its latest risk margins report shows margins adopted for short-tail classes are lower than those for long-tail classes, while those for outstanding claims liabilities are lower than those for premium liabilities.

APRA says insurers’ methods and assumptions used to determine diversification benefits continue to be based heavily on “judgement and general reasoning”.

“While there were some exceptions, we found that in general larger insurers with many lines of business and lower portfolio concentration tended to adopt higher diversification benefits,” the report said.

Larger insurers also tend to adopt lower risk margins than smaller insurers. Between lines of business, commercial lines have higher and more dispersed risk margins than personal lines.

For outstanding claims liability, the highest risk margins tend to be associated with the liability classes where there is a significant delay between the claim and claim payment.