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A recent report from S&P Global Ratings has underpinned the importance of “robust” reinsurance programs for Australian insurers in 2018.
The report, entitled Pricing for risk is helping Australia’s P&C insurers navigate choppy waters, found that solid reinsurance plans are likely to moderate the impacts of unexpected catastrophes and reinforce capital adequacy strength over the course of 2018.
“The insurers’ solid underwriting growth potential in 2018 partly reflects reasonable economic growth and further premium increases,” S&P Global Ratings credit analyst Craig Bennett said.
S&P noted that recently released operating results for the P&C insurance sector were “slightly higher” than the ratings agency expected, despite a string of disasters in 2017 which saw claims spike.
“Insurers that performed better than the industry average were characterized by the strength of their product diversification, premium rate changes, reinsurance expertise, and claims management practices,” the report notes.
“This scenario should continue to play out in 2018.”
Throughout 2017, rate increases paved the way for top line premium growth as insurers were able to manage claims expenses well while claims inflation, alongside rate-moderating market conditions, disruptors and regulatory changes, remained challenging.
Looking ahead, S&P was fairly buoyant on the sector as a whole.
“Overall, we maintain our stable outlook for the sector,” it said. “We expect insurance margins to hold up well this year. Margins were reasonably steady in 2017, as were the returns generated on net assets.”
