Diversity and opportunity in eight separate insurance markets

After the Australian insurance market enjoyed something of a golden age between 2005 and 2007 (when return on equity exceeded 20% for three years in succession), local insurers found themselves relatively unprepared for a rapid succession of external shocks, the most damaging of which is a change in the climatic cycle which has so far produced the Newcastle floods of June 2007, the Sydney hailstorm of December 2007, the Brisbane storm of November 2008, the Queensland floods of January 2009 and the Victoria bushfires of February 2009. These events, most of which have penetrated insurers’ catastrophe protections, have not only produced significant net retained losses but have also led to large increases in catastrophe reinsurance costs. These exceptionally heavy weather losses have been largely responsible for an increase in the market’s net combined ratio to 105% and an underwriting loss of A$1.1bn (US$924.37mn) in the year ending 31 December 2008

The Australian non-life market is divided between public and private sector companies. With the exception of the Territory Insurance Office in the Northern Territory, the public sector companies write only public property insurance and “social” classes such as compulsory third party and workers’ compensation. As at 30 June 2008 there were 77 private sector insurers authorised to conduct new or renewal business in Australia and 15 public sector insurers.