Globally, successive years of poor insurer performance have been driven by more frequent and severe natural catastrophe (CAT) events, rising attritional loss and social inflationary pressures affecting long-tail classes of business.
These trends have been exacerbated by increasing competition in the sector through a surplus of capital, with non-traditional capital sources attracted to the industries’ perceived non-correlated returns to investment markets (in a low global interest rate environment).
Despite recent portfolio remediation undertaken by insurers, the excess capital in the industry has hampered insurers’ attempts to dramatically improve underwriting performance.
Locally, the unprecedented bushfires at the start of the year followed by the COVID-19 pandemic have only exacerbated these trends. Insurers are now experiencing a dual shock affecting both sides of their balance sheet and we are seeing increasingly aggressive action taken by insurers to firm up underwriting performance in the current ISR and GL market.