KPMG’s 2012 General Insurance Survey reports that gross written premiums increased 8.3% to $28,602 million (2011:$26,399m) while underwriting surplus fell from $1,229 million to a deficit of $438 million. These results, which include the effect of interest rate reductions this year, have the surveyed insurers reporting an 18.5% decrease in their insurance profit to $2,510 million (2011:$3,081 million).
KPMG Insurance Partner, Ian Moyser said: “The 2012 result reflects the impact of further severe weather event losses, increased reinsurance costs for some insurers, and the effect of interest rate reductions. This confluence of factors has limited some of the benefit of premium increases.”
Catastrophic losses, such as the 2011 Queensland floods and storms, were not as prevalent in the year to 30 June 2012, however those costs were substantially borne by reinsurers. This year the general insurers have borne a larger share of the costs of smaller events, such as the Melbourne storms (Dec 2011), impacting their result.
Premium growth has continued to 30 June 2012, with pricing reflecting increased premium rates due to the severe weather events of 2010 and 2011. “The increases reflect the need by insurers to appropriately price for the risk they are underwriting and to cover the increase in the cost of reinsurance” said Mr Moyser.
We continue to see the insurers implement improvements to operational efficiency. It is worth noting that the industry’s capital coverage at 30 June 2012 was higher than 2011 at 1.79 times APRA’s minimum capital requirement. “This indicates that the industry continues to be well capitalised and insurers are generally well advanced in preparing for APRA’s revised capital regime (LAGIC) that commences on 1 January 2013,” Mr Moyser said.