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Floods 'severity' adds to rate pressure: S&P

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Australian gross written premium (GWP) is expected to grow 7.5% this calendar year, reflecting the impact of the NSW/Queensland floods, past catastrophes and claims inflation facing the industry, according to S&P Global Ratings.

The rating agency’s assessment of the industry says it expects primary property and casualty (P&C) insurers to experience continued upward pressure on reinsurance prices for property lines in particular, and across aggregate excess of loss protection covers, following the floods.

The floods have resulted in record insured losses in excess of $4.3 billion, adding to the insurance industry’s rising claims costs from bushfires, storms and other extreme weather events since February last year.

Material shortages leading to higher prices have also added to the claims cost burden facing the industry.

“It is fair to say the severity of the February/March floods has extended the premium rate hardening cycle through 2022 for affected lines,” Insurance Analyst Michael Vine told

“This is from the ongoing review of risk exposure in catastrophe regions, along with the broader impact of claims inflation on repair and replacement costs, and pressure from hardening reinsurance rates on renewal.”

S&P says the NSW/Queensland floods, combined with previous catastrophes starting with the Perth Hills bushfire in February last year, have resulted in losses of more than $5.5 billion.

“The catastrophe intensity has heightened in recent years, most notably the February 2022 south-east Queensland and New South Wales floods that caused extreme and unprecedented losses,” the S&P report says.

S&P says in the year ended March, insurers reported premium increases across all lines except compulsory third party with householders, fire & industrial special risk (commercial lines), professional indemnity, and domestic motor classes recording the strongest increases.

“Higher premiums predominantly reflected higher rates, supplemented with moderate volume growth, although the latter was similar to the prior year – the strongest in the past five years,” S&P says.

“Higher rates were also in response to rising claims costs in these classes. We expect effective risk management and appropriately structured reinsurance arrangements to moderate the impact of future large claims and catastrophic events.”

S&P in its report also outlined the strengths and weaknesses of the sector, as well as risks facing P&C insurers.

The strengths include strong historic operating performance, sophisticated pricing and risk controls and favourable economic and regulatory operating conditions.

Rising exposure to natural catastrophe claims and moderate growth prospects are the key weaknesses.

“We have recognised the emerging potential impact of natural perils and catastrophe risks in product risk,” S&P says.

“These risks could affect P&C insurers over the coming years, but the impact should remain manageable.”