Australian Insurance & Div Fins Weekly Insights Insured - Issue #49

Research evidence excerpt

Australian Insurance & Div Fins Weekly Insights Insured - Issue #49

Insurers flag rising premiums set to persist (IAG/SUN/QBE)

Australia’s major insurers have flagged sustained upward pressure on premiums, with commentary at the AFR Insurance

Summit highlighting the structural drivers of premium rises and increasing regulatory scrutiny. Key highlights include: (i) IAG

CEO Nick Hawkins warning of double-digit premium increases persisting for several years, driven by entrenched property

claims inflation linked to construction costs, labour shortages and higher rebuild expenses; (ii) insurers pointing to rising

natural catastrophe costs and long-term climate risk, with potential losses expected to increase materially over time,

reinforcing the need for continued repricing; and (iii) a growing regulatory and political focus on affordability and

transparency, with ASIC reviewing the industry code of conduct and the federal government pushing for clearer disclosure

of pricing drivers, setting up a more challenging operating backdrop for the sector. (Article)

UBS comment: Structural claims inflation to sustain personal lines repricing

Industry commentary continues to suggest structural claims inflation drivers, particularly in Home, are likely to remain

elevated over the medium term, requiring sustained premium rate rises. In the current global context, where commercial

pricing is moderating, we view this as reinforcing personal lines as the more attractive segment of GI, given higher barriers to

entry result in a greater ability to price for claims inflation and sustain margins. As a result, given greater near-term

divergence between personal and commercial pricing trajectories, we prefer IAG and SUN ahead of QBE. While we remain