Standard & Poor's has assigned a "low risk" insurance industry and country risk assessment score to the property and casualty insurance sector in Australia.
The IICRA score reflects the risks typically faced by P&C insurers operating in Australia and covers both personal and commercial lines. It is based on our view of Australia's "very low" country risk and "low" industry risk.
"We have a positive view on the profitability of the Australian P&C sector. Insurers have generally been proactive in managing their exposures to risks such as floods and earthquakes," said S&P credit analyst Caroline Strahan. "In addition, we have seen ongoing rate increases to recover higher claims and reinsurance costs. Insurers have also been revising product deductibles and cover in response."
S&P reported that a very strong institutional framework and its neutral view on product risk, barriers to entry, and market growth prospects were among other factors behind the low industry risk. In terms of country risk, we consider that the economic risk for Australia is low, political risk is very low, and we have favourable assessments for Australia's payment culture and rule of law.
"The low risk IICRA is the second-strongest score on a scale of six and provides the context for our analysis of an insurer's competitive position and business risk profile," said Standard & Poor’s credit analyst Michael Vine.
Australia is one of several countries to be assigned a low risk score for its primary P&C insurance sector. Other primary P&C insurance markets with low risk IICRA scores include Canada, France, Germany, Hong Kong, Korea, and Singapore.