The Australian Prudential Regulation Authority (APRA) says it continues to monitor adverse claims among general insurers and the impact of low interest rates on investment portfolios.

“APRA’s supervision has focused on insurers’ ability to effectively manage such adverse experience and maintain profitability and capital levels in an environment of low growth and investment returns,” the regulator’s annual report says.

Another area of supervisory activity is pricing risk in commercial lines.

“The review focused on ascertaining whether there was any evidence of aggressive pricing strategies and inadequate pricing in commercial lines based on data available to APRA.

“[It] found increases in the level of reinsurance capacity continued to result in heightened levels of price competition in the market, particularly for large corporate risks in fire and industrial special risks.”

APRA says it will further examine commercial lines insurers’ governance of pricing and oversight of pricing management and controls.

Another area of concern is the impact of low interest rates on investment portfolios.

“An area of continued supervisory focus during the year was monitoring the effectiveness of insurers’ risk management frameworks,” the report says. “In particular to ensure they highlight in a timely manner any changes in risk profiles arising from the low interest rate environment.”

Despite low rates hitting insurers’ portfolios, most have not made dramatic asset allocation changes.

“To date, most insurers have not changed their conservative investment strategies in response, with investments at an industry level still largely being held in cash and interest rate securities,” APRA says.