Insurance premiums in New Zealand and Australia rose well above the international average in 2011, even as profitability deteriorated, according to global reinsurer, Swiss Re.
Life insurance premiums increased 2.2 per cent in Australian and New Zealand last year, while globally premiums decreased 2.7 per cent. Non-life insurance premiums expanded 3.7 per cent to US$8.5 billion in New Zealand and grew 9 per cent to US$44 billion in Australia, well above the global average of 1.9 per cent.
"Growth of Australian and New Zealand life insurance markets should remain stable in the near future as the economies steadily recover from natural disasters," Kurt Karl, chief economist said in a statement.
"Rising disaster awareness, the higher expected frequency of catastrophic events and increased risk management preparedness measures are putting upward pressure on premium and reinsurance rates."
Karl said moderate overall growth is expected in 2012, with "recent mergers expected to further consolidate the Australian and New Zealand markets".
New Zealand's most recent merger was in December when IAG agreed to buy AMI for $380 million after the Canterbury earthquakes drained AMI's reserves and drove up reinsurance costs, leading to a government bailout.
There is also speculation Tower may come into play as owner Guinness Peat Group looks to sell down its 34 per cent shareholding to return money to shareholders.
Swiss Re expects robust growth in the non-life market over 2012 as price hardening supports premium growth. While, slower economic growth in advanced markets is predicted to weigh on demand for life and non-life insurances.
"The profitability of the life insurance industry has stabilized, but remains low," said Daniel Staib, one of the authors of the study. "Low interest rates remain the key issue for the life insurance sector, affecting investment returns and eroding the profitability of guarantee products."
The study is based on data from 147 insurance markets.