Swiss Re has raised concerns over the future of total and permanent disability products in Australia after moving to temporarily stop accepting new life business. 

The reinsurer says the changing nature of work, rising claim costs and evolving societal expectations have driven discussion around the long-term sustainability of TPD cover.

Mental health-related TPD payouts have nearly doubled in five years to more than $2.2 billion last year, Swiss Re says, citing Council of Australian Life Insurers data.

“This is creating significant strain on Australia’s financial system,” the company said.

“Swiss Re will not seek to add new clients in the life insurance segment until the market demonstrates a clear shift to sustainable product design.

“The company will use this opportunity to drive sustainable product design, particularly in TPD insurance.”

Swiss Re life and health reinsurance CEO Paul Murray says the move offers a chance for renewal.

“The shared goal across the industry is to preserve the social value of TPD – protecting Australians when they need it most – while creating a model that can endure economic cycles and demographic shifts,” he said. “This means balancing protection with long-term sustainability to avoid increased premiums, which can contribute to making insurance unaffordable.”

Australia and New Zealand life and health reinsurance head Lloyd Campbell Gibson added: “Our dedication to the … markets remains unwavering and this decision is necessary to safeguard our portfolio and to advocate for reform regarding product design.

“As an industry, we must transition from the sole focus of claims payment to partnering on an individual’s health journey.”

Mr Gibson says the announcement means "we are withdrawing from quoting for new business and will focus on working with our existing retail life insurance company partners to drive sustainable product design, particularly in TPD insurance, where there are significant sustainability issues that require urgent attention to better protect consumers over the long term".

While no new insurer clients will be added, Swiss Re will continue to support its current partners.

"Swiss Re remains committed to the Australia and New Zealand life insurance market as a reinsurance partner," Mr Gibson said.

Earlier this month, the industry said it was drawing up a new assessment framework for mental health claims following consultation with stakeholders.

CALI said the industry action plan would set out minimum standards for “consistent, evidence-based thresholds” when assessing claims; clarify the purpose of disability insurance; and reflect contemporary medical evidence and return to work outcomes.

The peak body says it does not comment on individual reinsurer or insurer business decisions.

CALI CEO Christine Cupitt told insuranceNEWS.com.au today: “As an industry, we are acting to strengthen our part of the safety net by … adapting products to reflect contemporary medical evidence, and working with government, regulators and community partners to build sustainable solutions for mental health and disability support.”