As the Australian general insurance market remains fickle, financial services company Jefferies Australia (Jefferies) has identified challenges that the industry might face in the near future.
Jefferies’ latest research analysed general insurers’ June 2023 reports and noted positive outlook statements, with increases in premiums and elevated investment earnings expected to drive near term earnings.
With the Bureau of Meteorology (BoM) declaring an El Niño event for the summer, Jefferies’ latest research expects warmer, drier conditions for many areas across Australia.
“In the past years, El Niño weather patterns have resulted in lower average insured losses relative to La Niña events,” the report said. “This aside, the general insurers have all increased catastrophe allowances for FY+1 (between +17% and +35%) relative to the pcp. For the most part, allowances are also above the prior year’s actual CAT experience. IAG is the exception, with its FY24f allowance -$59m below that of the prior year’s actual catastrophe claims experience.”
The report also noted that the recent reporting season reflected a tight reinsurance market, with outward reinsurance expenses increasing between +8.9% and +13.6% and renewals for SUN and IAG suggesting the impact of reinsurance and natural perils allowances could increase outward reinsurance expenses between +12% and +15% for FY24.
“This aside, there are some signs of a more stable market approaching, with the potential for modest increases or even flat pricing for upper layer coverage, at the Jan-24 renewals,” the report said.
Other predictions included:
In other news, data and analytics company GlobalData published its latest Insurance Database, which expects the Australian general insurance industry to grow to AU$123.1 billion by 2027.
