Australia premiums soften amidst reinsurance relief

Fewer large catastrophe losses helped improve terms for insurers.

Australia’s non-life insurance sector remained the dominant part of the country’s insurance market and showed improved profitability in the 2025 fiscal year.

Chee Yun, a financial analyst at AM Best, said stronger results were driven by both underwriting performance and investment returns. 

Insurers benefited from sustained premium increases over the past two to three years, particularly in motor and property lines, as companies adjusted pricing in response to earlier high inflation and rising reinsurance costs following major weather events in 2022 and 2023.

The repricing helped lift underwriting margins. 

At the same time, a relatively mild period for natural catastrophes compared with previous years reduced claims costs, further supporting profitability across the sector, including among the country’s largest insurers.

Investment income also contributed to the improved results. 

Insurers gained from strong equity market performance, including Australian stocks, and continued to earn solid returns from fixed-income assets as interest rates remained relatively high during the period.

Looking ahead, the report noted early signs of a softening in pricing after several years of increases. Improved profitability and fewer large catastrophe losses have led to more favourable reinsurance terms. 

This has encouraged greater participation from both domestic and international insurers, increasing competition and putting downward pressure on premium rates.

However, pricing trends remain uncertain. 

Ongoing conflict in the Middle East has introduced risks for insurers, including potential supply chain disruptions and higher material costs. 

The Insurance Council of Australia declared the conflict a significant event on 3 March, 2026 and is monitoring its impact while developing mitigation measures.

On the regulatory side, oversight remains strong. One key development is CPS 230, which focuses on operational risk management and resilience. 

The standard, which took effect on 1 July, 2025, requires insurers to strengthen business continuity planning, manage risks linked to service providers, and ensure critical operations can continue during disruptions. 

Existing service provider contracts have a transition period until renewal or 1 July, 2026. Another development involves reforms to reinsurance regulation. 

The Australian Prudential Regulation Authority is reviewing and modernising the framework, including exploring alternative arrangements. 

The changes are expected to improve efficiency, reduce regulatory burden and help address affordability pressures. Final standards and guidance are due in the first half of 2026, with implementation targeted for January 2027.