Insurance rates continue to soften in Australia, New Zealand: Report

The Australian property/casualty insurance market remains robust, according to a report issued last week by Standard & Poor's Ratings Services.

The report, "Australian Non-Life Insurance: Tempestuous Waters But Wind Still In Sails," noted that "premiums for all business lines currently exceed claims" and that "healthy margins are evident in most lines of businesses."

The report pointed out, however, that the data does not include the impact of this year's floods.

It also noted that "hard rates in the last few years have been eroded away by competitive pressures, especially in the commercial sector. Most insurers have managed to retain their books reasonably well despite the soft market," the S&P report said.

"On the whole, we are reasonably comfortable with the state of the market and the quality of the participants, especially with heightened regulatory oversight," according to S&P.

S&P also issued a report last week on neighboring New Zealand's property/casualty market.

"The ongoing soft market conditions in the New Zealand nonlife insurance sector will present greater challenges to generate premium growth in 2008," said S&P in "New Zealand Non-Life Insurance: Pursuit For Topline Growth Will Test Underwriting Discipline in 2008."

S&P said "the impact of lower premium rates has started to flow into the financial performance of insurers, which is evidenced by a growth of less than 1% in gross premiums written over the 12 months that ended September 2006, the lowest since 2000. Most price softening is within the commercial nonlife insurance sector, which is slightly offset by modest premium growth in the domestic building and contents, and motor nonlife insurance sectors."

The rating agency said it "believes that future profitability will depend on insurers' ability to maintain underwriting discipline while maintaining market share."

S&P said its outlook for the New Zealand market "remains stable, reflecting the moderately low industry and economic risks. The softening market conditions had a limited impact on nonlife insurers' profitability to date due to insurers' higher commitment to underwriting discipline relative to previous years."