Executive Summary

The Australian general insurance market has maintained its strong momentum into the second half of 2025, with insurers reporting robust profitability and return on equity (ROE) stabilising around 19% FY251. Underwriting performance was notably improved during this last period, which when combined with solid investment returns and a relatively calm claims environment, has resulted in the industry’s best performance for a decade. However, it is important to view these results in context: they follow a period of poor profitability, and the five-year average ROE although on the rise, remains modest at just 7%. This suggests that while the current market conditions are favourable, they represent a recovery rather than a long-term trend of sustained high performance.

One of the most notable shifts in the market has been the resurgence of competition. Insurers are broadening their risk appetite and new capacity is entering the market, resulting in downward pressure on pricing across several lines. This is a welcome development for many policyholders, particularly those in sectors that have faced steep premium increases during the recent hard market cycle. Nevertheless, inflation and elevated claims costs continue to exert pressure, meaning that the baseline cost of insurance remains higher than pre-cycle levels. Insurers are still exercising caution in risk selection, especially in sectors exposed to climate volatility, emerging technologies, or systemic risks. As such, businesses must remain vigilant in their risk management practices to secure favourable terms and pricing.

Overall, while the market has softened and competition is increasing, the underlying cost pressures and selective underwriting behaviours indicate that the current environment is not without its challenges. Strategic risk management, accurate data, and proactive engagement with insurers will be essential for businesses seeking to optimise their insurance outcomes in this evolving landscape.

Sector Snapshots

Property

After many years of premium increases and restrictive conditions, the property insurance market has turned a corner. Property Gross Written Premium (GWP) is reported to have reduced by 8% for FY25, the first reduction since 2016. As new development, construction costs and inflation continue to drive increases to sums insured, this reduction to GWP reflects the sizable premium rate reductions that can be achieved.

For well managed risks which are desirable to insurers, double digit decreases have become common, averaging industrywide to 5-10% reductions. Capacity has increased both locally and with overseas markets, which is resulting in broader underwriting appetites and conditions.

Sectors like agriculture and construction - while also benefiting from competition and some improvement in price and cover conditions are still facing high premiums and strict terms when compared with other sectors. Accurate valuations and quality risk information remain essential for getting the best results.

Insurers are cautious about the risk implications of new and emerging technology as well as keeping up with the pace of change. Li-ion batteries are increasingly prevalent across all sectors, from industrial scale energy storage and backup power systems to solar battery storage and electric vehicle charging at residential and strata properties. Even the management of batteries in power tools, forklifts, and other smaller scale applications is under scrutiny as these are recognized as a common and avoidable cause of fire. Risk awareness and proactive management is key; however, with technology changing so rapidly, businesses should be prepared to adapt their approach as the loss research develops.

Climate and Catastrophe Risk

Extreme weather continues to be a major issue across all policy classes. The Insurance Council of Australia reports that catastrophe losses now make up nearly 0.75% of GDP over the past five years, up from just 0.25% between 1995 and 2000. Catastrophe losses totalled $2.61 billion in 2023–24 and $1.97 billion in 2024–25, highlighting the growing financial toll of extreme weather events. This accelerating impact is outpacing economic growth, intensifying pressure on insurers and communities to prioritize risk mitigation and build more resilient infrastructure. Extreme weather costs incurred by insurers have averaged $4.5 billion per year over the last five years, up 67% from the previous five-year period and risks which are exposed to large weather events remain difficult to insure.

Turning to agriculture, this sector remains one of the most exposed to climate risk, with drought, flood, hail, and bushfire all presenting ongoing challenges. Premiums and underwriting standards remain high, particularly for property and liability covers. While uptake of traditional multi-peril crop insurance is still low overall, there’s growing interest in parametric and index-based solutions, thanks to advances in satellite data and analytics. These products offer faster claims settlement and greater transparency, but affordability and the basis of cover are still barriers in areas of high risk.

Liability

In liability insurance, the story is similar. More insurer appetite and capacity are leading to softer market conditions, with an average rate reduction of 6%. Again, these low averages reflect the range and large price reductions are being achieved for some business and sectors.

Claims and social inflation and litigation risk are still top of mind for insurers, especially for long-tail exposures and sectors with complex liability profiles such as where contractor and labour hire exposures are involved. Insurers are still pricing these risks with caution, through premium and/or high excesses and strict conditions.

Executive and Professional Risks

Management Liability / Directors & Officers’ Liability Insurance

The Management Liability market remains competitive, and most clients are likely to see favourable pricing and rate reductions of around 10-15%. There remain certain industries that are viewed as higher risk, particularly those in sectors that have seen several insolvencies such as construction and hospitality. Whilst coverage is available to companies in these sectors, insurers manage their exposure through the imposition of exclusions that remove cover in respect of claims arising from companies being unable to pay their debts.

D&O appears to be in a downward spiral which has previously been described as "irrational" by the Lloyd's Chief of Markets. Although pricing is expected to start leveling out, it may not yet have hit bottom as insurers continue to compete for market share. The rapid fall in pricing for D&O is causing some concern as to its sustainability, and insurers are watching regulator and economic trends closely. There are calls for common sense to avoid another sharp market correction if insurer profitability becomes challenged once again.

Risk management remains key for policy holders. Boards are being urged to maintain robust risk management frameworks and prepare for potential litigation and regulatory scrutiny linked to privacy breaches, greenwashing, and sustainability reporting failures.

Professional Indemnity

Professional Indemnity (PI) insurance remains broadly competitive for most insureds. However, similar to other financial lines, certain sectors and activities attract greater scrutiny from underwriters. This is reflected in pricing or policy restrictions, particularly for Design & Construct contractors, valuers, and property development fund managers, where insurer appetite remains limited. Well-managed risks outside these higher-risk categories are generally seeing rate reductions between 5–15%. While the market is stable overall, insurers continue to differentiate based on risk quality, claims history, and sector exposure. Businesses with strong governance and risk controls are best positioned to benefit from favourable terms. As underwriting discipline persists, insureds should expect continued focus on risk transparency and documentation to support renewal negotiations.

Cyber

The cyber insurance market is evolving, with pricing trending downward due to increased competition and improved cyber resilience among policyholders. Insurers are investing in education, monitoring, and risk management tools that offer value beyond claims payment. Despite these improvements, cyber threats remain frequent and costly, driven by ransomware and credential compromise. The rise of AI has made scams more sophisticated and accessible, increasing targeted fraud and data theft. In FY24, small businesses saw an 8% rise in average cyber loss to $49,600, while medium and large firms experienced declines. Regulatory responses and litigation following major breaches, such as those involving Medibank, Optus, and Qantas are expected to influence future market dynamics. Class actions underway will be closely watched for their broader impact.

Looking Ahead

Looking ahead, most insurance classes are expected to remain in softer market conditions as insurers compete for market share. However, trends in claims development are being closely monitored, and any rise in claims frequency or systemic events could prompt corrective action. Achieving the best outcome for your insurance program, at any stage of the insurance market cycle, will require strong risk management practices and a commitment to continual improvement.

National Workers’ Compensation

Australia’s workers’ compensation landscape is undergoing significant transformation in response to rising psychological injury claims, legislative reforms, and evolving workplace dynamics. This update provides a jurisdictional overview and highlights key regulatory and market trends shaping the sector.

Premium Rates & Scheme Performance

New South Wales

Premiums have increased by an average of 8% for 2025–26, driven by escalating psychological injury claims and scheme deficits. The NSW Government has introduced the Workers Compensation Legislation Amendment Bill 2025, aiming to modernise the scheme and improve claim processing for mental health injuries.

Victoria

The WorkCover premium rate remains at 1.8%, with reforms focused on mental health eligibility, extended weekly payments, and improved service standards. The Workplace Injury Rehabilitation and Compensation Amendment Bill 2025 introduces mandatory training for Return-to-Work Coordinators and a Code of Claimants’ Rights.

Queensland

Maintains one of the lowest average premium rates at $1.34 per $100 of wages. A new Medical and Allied Health Advisory Services (MAHS) panel was launched in July 2025 to streamline injury support.

South Australia

Continues its premium freeze at 1.85%, citing strong return-to-work outcomes and scheme stability.

Western Australia

Average premium rates remain at around 1.8% for 2025-2026, which is consistent with the prior year. Recent legislative updates are expected to maintain scheme stability and better support both employers and injured workers.

Australian Capital Territory (ACT)

The ACT scheme continues to deliver stable premium rates, with an average premium rate of $2.04 per $100 of wages for 2025-26, which is a minor increase from the prior year. Recent efforts have centred on enhancing mental health support services and streamlining return-to-work processes. There is an ongoing review of scheme performance with a focus on improving outcomes for psychological injury claims.

Regulatory & Legislative Development

New South Wales Reform Highlights

· Psychological injury claims must now meet stricter thresholds (31% impairment for extended benefits).

· Fast-track claim process introduced for bullying and harassment-related injuries.

· Lump sum death benefits increased to $955,950, with annual indexation from April 2026.

Western Australia

The Workers Compensation and Injury Management Bill 2023 takes effect from 1 July 2025, modernising claims handling and injury management protocols.

National Trends

Safe Work Australia’s 2024 scheme review highlights a growing emphasis on psychosocial risk prevention, return-to-work strategies, and system harmonisation across jurisdictions.

Claims Trends & Emerging Risks

Psychological Injuries

These continue to rise, with NSW reporting only 50% return-to-work rates within a year for psychological claims, compared to 95% for physical injuries.

Mental Health Focus

National strategies now prioritise early intervention, workplace culture improvements, and manager training to reduce mental health-related claims.

Technology and AI

Legislative amendments in NSW now require digital work systems (e.g. AI-based scheduling tools) to be assessed for health and safety risks, reflecting the growing role of tech in workplace injury prevention.

Looking Ahead

The workers compensation sector is expected to remain under pressure due to rising claim costs and regulatory tightening. Employers should:

· Review workplace mental health programs.

· Ensure compliance with new legislative thresholds.

· Monitor premium impacts and scheme changes across jurisdictions.

Proactive injury prevention, accurate wage declarations, and early return-to-work strategies will be key to managing costs and improving outcomes.