CRE Insurance Market Update: July 2022

Now we are through the full Financial Year for 2022, we lift our eyes to the year ahead having generally overcome a lot of market challenges in the last couple of years; now to only face even more.


Natural perils continue to frame the insurance industry for many regions, with Australia the apparent epicentre of rain and flooding in the first half of the year – Sydney has already registered 1.77 metres (70 inches) of rain so far this year, far eclipsing its 1.17 metres annual average inside of 6 months.

The February/March rain and flooding events across NSW and Queensland has equated to around AUD 4.8B in insured losses across 225,000 claims, with the June event expected to top that up to an even AUD 5B once final numbers trickle through.

Compounding the scale of these events is the rampant inflation fuelled by significant labour constraints attributed to COVID, energy and food access from the Russia/Ukraine conflict and the China trading instability; all flowing throughout global supply chains, severely constraining access against sharp increases in demand.

Construction costs in the calendar year for 2021 increased by 7.3%, the highest annual growth in this metric since March 2005 according to the Cordell Building Costs Index, with all indicators in the first 6 months of this year seemingly leading to another increase for 2022.

All of this leads to a significant increase in the cost and time of settling claims for insurers – and unfortunately for buyers, a delay to the insurance market premium stabilisations we were anticipating would start to occur toward the end of this year.

APRA General Insurance Statistics Summary (March 2022):

The general insurance industry reported a net profit after tax of AUD $1.3B and a return on net assets of 4.3% during the year ended 31 March 2022, which is an increase compared to the prior year.

The increase in net profit was driven by a stronger underwriting result, in part reflecting the impact of premium increases across certain classes of business, however these results do not materially reflect the full impact of the incurred claims costs because of the NSW and Queensland floods.

The industry also recorded a significant investment loss of $942 million – driven by unrealised losses on interest bearing investments due to a sharp increase in bond yields during the March quarter.