An Australian insurance giant has predicted there will be double-digit rises in insurance premiums in the next year, but what is causing this huge surge in rates?
Insurance Australia Group has made the prediction as it passes on a upwelling in global reinsurance costs.
IAG chief Mike Wilkins told BusinessDay that reinsurance price increases were only now working their way through the system, but further measures were needed to protect margins.
“We only get one chance a year to reprice,” said Wilkins. “We see the pricing outlook for the next year for home and motor in the range of 5% to 10%, some will be more, some will be less.”
Reinsurers are still trying to claw back bumper losses from the various natural disasters that have hit the world, and in particular Australia and New Zealand.
Wilkins plans to release an ongoing review of IAG's British car insurer at the end of the year, amid speculation that it could be eyeing an exit from the tough market.
“We've had a tough few years, mainly driven by external market factors, particularly perils and higher reinsurance costs, but we've started to come through the back end of that," said Wilkins.
It is worth noting that earnings from IAG’s results this week that its broker-focused commercial insurance business, CGU, nearly doubled to $258 million.
This mirrors how Suncorp’s results, also announced this week, were dramatically boosted by its broker-led commercial insurance business too.