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State of the Market Update - Highlights of 2020.

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Highlights for the year ending 31 December 2020.

  • The start of 2020 for Australia was shaken by bushfires, floods and hailstorms, causing widespread property damage and business interruption losses. The impacts on the insurance market were further compounded shortly thereafter by the COVID-19 pandemic.
  • Insurance profitability took a significant hit in 2020, reporting $35m for the calendar year. This is a 98.9% drop compared to the $3.1bn reported in 2019. The result was driven by natural catastrophe claims costs, provisions for business interruption claims and falls in investment income.
  • Within the underwriting results, insurers reported increases in gross earned premium in most classes of business. This was particularly evident in the Householders, Fire and ISR, and Professional Indemnity classes as insurers increased premiums in response to rising claims costs.
  • Average premium increases of 31% locally and 24% globally have been observed in Q3, 2020. An increase in premium-retention trade-offs and more restrictive cover as well as reduced competition are just some of the local trends observed in the Australian property market this year.
  • Gross incurred claims costs were significantly higher during the year with the recognition of COVID-19 related business interruption provisions. Claims costs from catastrophic bushfires and storm events, and a large strengthening of long tail claims reserves, were also major drivers. In contrast, claims for domestic motor vehicles fell in line with decreased vehicle usage as a result of the social restrictions introduced in response to COVID-19.
  • Investment income fell by almost 50% during the year due to lower returns in equities, fixed interest investments and indirect investments, particularly in the COVID-19 impacted March quarter.
  • The industry PCA coverage ratio was slightly higher compared to the same time last year at 1.70x.
  • The recent COVID-19 Australian business interruption insurance test case ruling has further added to the stress of the market.

State of the Market Update - Highlights of 2020.

State of the Market Update - Highlights of 2020. 

Highlights for the year ending 31 December 2020.

  • The start of 2020 for Australia was shaken by bushfires, floods and hailstorms, causing widespread property damage and business interruption losses. The impacts on the insurance market were further compounded shortly thereafter by the COVID-19 pandemic.
  • Insurance profitability took a significant hit in 2020, reporting $35m for the calendar year. This is a 98.9% drop compared to the $3.1bn reported in 2019. The result was driven by natural catastrophe claims costs, provisions for business interruption claims and falls in investment income.
  • Within the underwriting results, insurers reported increases in gross earned premium in most classes of business. This was particularly evident in the Householders, Fire and ISR, and Professional Indemnity classes as insurers increased premiums in response to rising claims costs.
  • Average premium increases of 31% locally and 24% globally have been observed in Q3, 2020. An increase in premium-retention trade-offs and more restrictive cover as well as reduced competition are just some of the local trends observed in the Australian property market this year.
  • Gross incurred claims costs were significantly higher during the year with the recognition of COVID-19 related business interruption provisions. Claims costs from catastrophic bushfires and storm events, and a large strengthening of long tail claims reserves, were also major drivers. In contrast, claims for domestic motor vehicles fell in line with decreased vehicle usage as a result of the social restrictions introduced in response to COVID-19.
  • Investment income fell by almost 50% during the year due to lower returns in equities, fixed interest investments and indirect investments, particularly in the COVID-19 impacted March quarter.
  • The industry PCA coverage ratio was slightly higher compared to the same time last year at 1.70x.
  • The recent COVID-19 Australian business interruption insurance test case ruling has further added to the stress of the market.
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