Commercial property insurance in Australia - the fire and industrial special risks (ISR) class - sits at the sharp end of the industry's catastrophe risk problem. The Australian Prudential Regulation Authority (APRA) quarterly data released on May 29 2026 captures two and a half years of performance for this class and the reinsurance cost story is extraordinary.
In the September 2025 quarter, the net expense from reinsurance contracts held for the Fire and ISR class was $833 million. Net claims incurred in the same period were $538 million. The bill to transfer risk to reinsurers was 55% higher than the claims the class actually paid out. In the June 2025 quarter, reinsurance cost $711 million against claims of $635 million - again, reinsurance exceeding claims. In December 2024, reinsurance cost $820 million against claims of $570 million.
This is not a temporary anomaly. Across the ten quarters in the APRA dataset, reinsurance costs for the Fire and ISR class have ranged from $86 million (June 2024, an unusually low quarter) to $833 million. The typical quarterly range, setting aside outlier quarters, is $470 million to $830 million. For a class generating $1.6 billion to $2.8 billion in quarterly gross written premium (GWP) depending on the season, that is a cost structure that fundamentally constrains the underwriting result regardless of how well the primary book performs.
The insurance service result for Fire and ISR has ranged from negative $16 million (December 2023) to $399 million (December 2024) across the ten quarters. This is not primarily driven by claims volatility - net claims have been relatively range-bound between $538 million and $894 million per quarter. It is driven by the interaction of reinsurance costs and premium income in any given period.
When reinsurance costs are low relative to a quarter - as in June 2024, where the $86 million reinsurance bill allowed a $270 million ISR - the line looks excellent. When reinsurance costs surge to $833 million in a single quarter, the line's margin is compressed almost to zero regardless of claims performance. The March 2026 quarter illustrated this again: claims of $751 million were not dramatically elevated, but a reinsurance bill of $472 million left the ISR at just $79 million on GWP of $1.63 billion.
Fire and ISR: net claims vs reinsurance expense ($M)
Quarterly, December 2023 to March 2026 — all APRA-authorised general insurers
Source: APRA, Quarterly General Insurance Performance Statistics Database, Sep 2023–Mar 2026, released 29 May 2026.
Insurance Business approached insurers and brokers with questions about the significance of this data and what it says about where the real cost pressure in commercial property is coming from. IB also suggested that if property rates have been softening but the underlying reinsurance cost structure hasn't moved at the same pace, how sustainable is that gap and what happens to pricing if Australia has another bad catastrophe year?
A major broker and insurer both suggested, off the record, that IB was not reading the data correctly and that a fuller set of data would tell a different story. The insurer said that data alone does not represent the full picture and that available capital, amongst other things, is another major ingredient in insurance pricing.
Swiss Re's Michaela Flanagan, P&C market head ANZ, also said that reinsurance is an important component of the insurance value chain but it is "only one of several factors that contribute to the overall cost of insurance."
"Reinsurance provides resilience by absorbing shocks from both frequent and less frequent, high-severity events," said Flanagan. "This long-term approach helps ensure sustainable capacity and resilience in markets exposed to catastrophe risk."
As IB reported in April 2026, reinsurance premiums allocated by Australian general insurers reached $4.3 billion in the September 2025 quarter alone and the ratio of reinsurance premiums to insurance service revenue is among the highest of any developed-world property and casualty market. Following the catastrophe years of 2019 to 2022, reinsurance costs surged at successive renewal seasons, and those higher costs have been a significant component of the premium increases that commercial clients have absorbed over recent years.
The Australian Reinsurance Pool Corporation (ARPC) exists partly to address cyclone risk, and its availability has moderated some of the volatility for residential property. But the Fire and ISR class which covers commercial and industrial property sits largely outside the ARPC's scope, leaving its reinsurance costs directly exposed to global catastrophe market conditions.
For commercial property brokers, the APRA data could underline a point that is sometimes lost in conversations about the soft market. Commercial property rate reductions of 10–20% have been recorded across the Pacific region and insurer appetite has broadened. But the underlying reinsurance cost structure has not changed at the same pace. Insurers absorbing lower primary premiums while facing reinsurance costs that regularly exceed actual claims are operating on narrow margins, and the risk of renewed hardening - particularly following another active catastrophe year - remains material.
Clients with complex or high-value commercial property exposures benefit most when their broker understands this dynamic and can frame conversations about coverage, deductibles and risk mitigation in the context of what the market's reinsurance structure actually costs.
Source: APRA, Quarterly General Insurance Performance Statistics Database, September 2023 to March 2026, released May 29 2026. All figures are in Australian dollars and based on APRA-authorised general insurers. Lloyd's Australian operations are not included
