Australia’s prudential regulator has told federal lawmakers that insurers are operating in a period of elevated risk, even as regulated institutions continue to meet resilience benchmarks. Appearing before the Senate Economics Legislation Committee in February, Australian Prudential Regulation Authority (APRA) chair John Lonsdale (pictured) said Australians “can be confident in the financial and operational resilience of the banks, insurers, and superannuation funds that APRA supervises,” while also noting that “uncertainty and risks in the global financial system are at heightened levels.”
Lonsdale cited geopolitical tensions, cyberattacks, operational outages, and the possibility of regulatory fragmentation across jurisdictions as channels through which financial shocks could affect Australian insurers. Working with agencies on the Council of Financial Regulators (CFR), APRA is updating its crisis response playbook, increasing intelligence sharing, and testing contingency arrangements, including for payment and settlement infrastructure that supports insurance-related cash flows.
For general insurers, Lonsdale pointed to climate and natural catastrophe risk as continuing areas of attention. APRA data show that the past year was the most expensive claims year since 2022 for the sector, with almost $3.5 billion in losses from bushfires, floods, and cyclones. Major bushfires in Victoria and flooding in North Queensland have already contributed to claims activity early in 2026. APRA’s general insurance Climate Vulnerability Assessment is expected to examine how changes in physical and transition risks may affect insurance affordability and availability over the medium term, and how these shifts could influence reinsurance demand, pricing, and capital planning.
Recent research indicates that these risk trends are feeding through to pricing and product decisions. Gallagher Bassett’s 2026 global claims study, The Carrier Perspective: 2026 Claims Insights, identifies premium affordability and insurability as the main business challenge for Australian insurers this year. Drawing on responses from 250 senior insurance leaders in Australia, North America, and the UK, the study reports that 22% of Australian respondents view premium affordability and insurability as their top concern. The report links this to claims inflation, broader economic conditions, compliance and regulatory costs, and catastrophe exposures that affect capacity and rate adequacy. According to Gallagher Bassett, affordability pressures are most marked in general liability, property, and auto liability portfolios. More than one-third of Australian respondents said general liability is the line where they have seen the largest combined shift in frequency and severity, with property and auto also recording notable changes.
Across the Australian market, 70% of insurers reported both higher costs per claim and an increase in claim frequency over the past year, and 50% said they plan to raise premiums. Gallagher Bassett chief client officer Pete Diskin said: “Some business risks highlighted in the 2025 report persist, while newly identified challenges have quickly grown into key strategic concerns in the past year. Insurers also say they are enhancing risk assessments and implementing changes to coverage limits and terms. Sustaining growth under these conditions requires that insurers implement proactive cost management strategies. How they approach pricing, claims forecasting, and triage will determine profitability.” For Australian insurance professionals, the findings indicate ongoing scrutiny of portfolio mix, retentions, deductible structures, and reinsurance programs as carriers respond to cost trends and policyholder affordability.
Gallagher Bassett’s research also shows cyber and data risk ranking among the most significant challenges for Australian insurers. Data and cybersecurity have moved into second place for local respondents, cited among the top three issues by more than half and ranked number two overall at 20%. In response to regulatory expectations and increased exposure to cyber incidents, most insurers report using data encryption and regular data audits on core systems. At the same time, technology is influencing how fraud is detected and managed in claims operations.
Almost three-quarters of Australian insurers surveyed say they have implemented generative AI tools for fraud detection, and 72% report an increase in fraudulent or suspicious claims involving AI-generated documents. This has led to adjustments in verification processes for documentation and identity. The study notes that 62% of Australian respondents see technology-related fraud and AI manipulation as important contributors to higher claim-related costs. Insurers are applying AI-driven predictive analytics, rules-based engines, and digital monitoring tools to identify anomalies earlier in the claims lifecycle, while keeping manual review in place for complex or sensitive matters. More broadly, 40% of Australian and 46% of global respondents list the need to adapt to rapid technological change among their top three challenges. The results suggest that data governance, model risk management, and explainability are being more fully incorporated into enterprise risk frameworks.
Regional outlooks provide additional context for Australian carriers. S&P Global Market Intelligence’s 2026 Asia-Pacific insurance outlook points to overlapping pressures from geopolitics, natural catastrophes, AI, and capital markets, with slower headline premium growth in some areas and continued development of specialist lines, including cyber and longevity, from a relatively low base. Trade and supply chain patterns have been affected by geopolitical developments, including tariff measures introduced by the Trump administration in 2025. Steve Tunstall, general secretary of the Pan-Asia Risk and Insurance Management Association, said the tariff changes created uncertainty for cross-border trade and added complexity to risk management across logistics networks. He noted that there are “a lot of risks that can’t be easily protected across [the] supply chain and logistics,” and that many organisations are reassessing investment and growth plans.
Natural catastrophe activity across Asia-Pacific in 2025 again illustrated the difference between economic and insured losses. Aon’s Climate and Catastrophe Insight report estimates that regional natural disasters generated at least US$76 billion in economic losses, with slightly more than US$7 billion insured. The data indicate substantial underinsurance in several markets, despite the presence of traditional reinsurance and alternative capital. For Australian insurers and reinsurers, these developments intersect with domestic issues around affordability and capacity, and are relevant to accumulation management, retrocession strategies, and product structures for climate-exposed classes.
