Property and casualty premium in Australia is projected to increase 4.7% in real terms this year, as the market bounces back strongly from the 1.4% growth it recorded last year, Swiss Re says.

For next year, the market is likely to achieve premium growth of around 3.9%.

“We expect a strong rebound of the Australian non-life business,” the reinsurer’s Swiss Re Institute told insuranceNEWS.com.au.

“Australian non-life insurance premium is expecting above-trend growth for this year and next underpinned by the upbeat cyclical economic momentum and the continued hardening of rates.

“We are still in the midst of a hard market. Swiss Re Institute expects the Australia commercial lines positive pricing momentum continues to be at high levels.”

And barring any further major catastrophe losses, the institute says it also expects the industry to improve its underwriting results after a difficult 2020 that led to a negative return of equity of -1.1% for insurers.

“Overall results in [the first quarter this year] were again negative, but this was due to unrealised investment losses on fixed income securities,” the institute said, referencing figures from the Australian Prudential Regulation Authority.

“The underwriting performance remained in positive territory with a net combined ratio of 93%.”

The institute last week released its latest Sigma study, predicting non-life premium volume globally will grow at a stronger 2.8% this year and 3.7% in 2022 from 1.5% last year.

It says the industry is getting a lift-off from the “strongest rate hardening for two decades in commercial lines”.

The Sigma study outlined how the industry has weathered the COVID storm and what lies in store when the pandemic is over.

Australia is among the markets that chalked up some of the sharpest increases in commercial rates, with financial and professional liability lines up an average 39% last year, the study said.

The study says inflationary pressure looms as a growing risk for Australia’s non-life sector in the medium term.

“Inflation readings in Australia ticked up recently,” the study said. “Inflation is rising as a mix of structural and transitory forces push prices higher.

“This is a growing risk for insurers, potentially making non-life claims more costly, particularly the more inflation-sensitive longer-tail liabilities.”

See ANALYSIS.