General insurance profits soared by nearly 300% in 2021 compared to the frenzy experienced from health and environmental disasters in the year prior, according to KPMG International’s annual review of the market.
In 2020, bushfires and other natural catastrophes dragged the gross written premium (GWP) down to $915 million. They bounced back with a 11% increase in 2021, driving the total profits to $3,486 million. However impressive, the figure is still way below pre-pandemic levels.
Scott Guse, insurance partner at KPMG, said climate change remains one of the main factors — and focuses — of insurers moving forward, especially with the recent flooding in Queensland.
“Insurance is cyclical by nature and the prevalence of natural disasters was primarily to blame for a poor 2020 – and a lack of these last year saw strong gains in 2021,” Guse said. "But we will see the current Queensland/NSW floods hitting 2022’s figures with early cost estimates of $2.32 billion being reported by the Insurance Council of Australia. This will have an inevitable impact on premiums going forward.
“The increased likelihood of similar events going forward is a concern and could lead to more ‘up and down’ years in future,” Guse added. “Without preventative actions, more areas are expected to become uninsurable and the levels of under-insurance will inevitably increase.”
On the other hand, KPMG reported a poor investment income performance, falling 64% from 2020 to $510 million. Pandemic-related impacts also took a toll on premiums, with travel GWP at $234 million in 2021 compared to $1,197 billion in 2019.
Still, insurers are optimistic about continued growth in GWP as they increase rates to reflect the underlying risks and costs of a policy to drive a more sustainable product, KPMG said in the review.
“Looking forward, the industry will be focused on improving digitisation, particularly in customer-facing processes, to deal with a post-COVID world,” Guse said. “This will also enable better responsiveness to legislative changes and transitioning financial reporting to the new IFRS 17 standard.”
