Commercial premium growth in Victoria is likely to slow this year because of competition, according to the state’s Treasury.

Budget papers released last week show the Government expects 5.2% growth in revenue from general insurance taxes in 2014/15, which reflects market expectations for weakness in commercial premium.

Last December’s budget update had forecast growth of 6.5%.

The change “is due to an increase in competitive pressures, driven by the attraction of new entrants responding to strong recent premium growth, as well as reduced reinsurance costs”, the papers say.

Victoria earned $816.2 million from insurance taxes in the year to March, down 34% after the fire services levy (FSL) on premiums was dropped last July 1.

But Treasury expects increasing tax revenue from insurance in coming years, despite dropping the FSL and announcing the end of stamp duty on life insurance from July 1.

It has budgeted for $1.09 billion of insurance taxation in 2014/15, $1.16 billion in 2015/16 and $1.24 billion in 2016/17.

The state’s fire brigades received $5.8 million in residual FSL in 2013/14, and life insurance taxes of $3.7 billion were paid.

Stamp duties on compulsory third party premiums totalled $170.5 million and are expected to raise $180.5 million this financial year and $189.7 million in 2015/16.

The 10% tax on general insurance premiums, excluding compulsory third party, is budgeted to deliver $913.9 million this year and a 6% increase to $972.4 million in 2015/16.