Optima In Focus Webinar: Commercial Lines - a summary

Date28th November 2023

In November 2023, capping off our Optima series of events, Finity Principals Susie Amos and Pravesh Ponna were joined by insurance professionals from around the country for their “Optima in focus: Commercial Lines” webinar. Susie and Pravesh discussed the state of the commercial lines insurance market, the outlook for the year to come and the key themes impacting the sector.

FY23 saw continued premium growth and a move back to profitability for the Australian commercial lines insurance market. A potential market softening comes at a time when there are a number of topical issues impacting the commercial lines market, including technology transformation, cyber risk, climate change, the ARPC cyclone pool, and an evolving distribution market.

Continued premium growth for commercial lines in FY23

The 2023 financial year (FY23) has seen the fifth consecutive year of double-digit growth (12%) in Gross Written Premium (GWP) for the commercial lines insurance industry. We now estimate the industry GWP to be over $27 billion, which is almost double what it was in FY17. A significant driver of the increased GWP over recent years is strong rate increases off the back of the hard market. In addition, we have seen more capacity entering from overseas in certain segments which has both increased competition in the market and helped to support the top line growth. There are now clear signs that the hardening market is tapering off.

Moving back into profitability

Following seven consecutive years of unprofitability for the commercial lines industry, the last two years have seen the industry move back into profitable territory, with FY22 and FY23 returning underwriting margins of 6% and 17% respectively. COVID-19 Business Interruption reserves have caused reported results to be quite volatile – however even without the windfall of reserve releases over the past two years, FY22 and FY23 were still profitable.  In addition, industry investment returns were high over FY23, resulting in very strong commercial lines profitability.

Key themes shaping the sector

The commercial lines sector is being shaped by a variety of risks, opportunities, innovations and trends.

Technology transformation

Technology transformation has been a topic of conversation in the industry for some time. However, more recent innovations in areas such as Artificial Intelligence (AI) have intensified the focus on technology and opened up a host of opportunities to uplift the insurance industry. We are seeing a greater emphasis on information and best using the data available to facilitate decision making, automation and harnessing its associated efficiencies and cost savings, and sophistication and the heightened levels of granularity and in-depth analysis becoming available.

Distribution trends

Technology has driven an evolution in distribution trends. We have seen growth in contestable platforms, opening up new opportunities for efficiency and value – albeit at a high cost, and with added considerations around maintaining or growing profitability. Technology is also acting as a key enabler for the broker channel – allowing brokers to add value with better knowledge and insights. Conversely, while the direct channel offers greater opportunity for profitability, growth is slow.


The availability of market data in the cyber insurance sector is limited, however Finity estimates a $500m premium pool. Rate changes in recent years have been significant (90% and 70% in FY21 and FY22 respectively), however this has eased in the last year (15% increase). While take up of cyber insurance is rising significantly, particularly amongst larger corporates (around 60% of businesses are now covered), claims volatility is high and the experience from claim to claim varies broadly. With more new players coming to the market, we foresee a year of increased growth and competition in the sector.


The climate is changing and insurers need to consider the impacts of both short-term climate cycles (for example events related to El Nino, such as bushfires) and long-term climate change (for example how the risk environment will develop over time in a high-emissions scenario). Insurers are continuing to evolve their understanding of the longer-term implications of climate change.

ARPC Cyclone Reinsurance Pool

All large insurers have already joined the ARPC Cyclone Reinsurance Pool, and we anticipate the small to medium insurers will join at the end of 2024. Interestingly, we have not observed major changes in appetite in Northern Australian risks as a result of the introduction of the pool. Pricing impacts have been difficult to decipher in an environment with competing factors such as high inflation, reinsurance costs and profitability issues.  

What will FY24 look like?

For most classes we expect there still to be overall increases in premium rates in FY24, but the rate of increase will slow down compared to what was seen over FY23. We expect the higher rate increases to be more targeted where they are required, and we expect more moderate rate increases for the majority of risks. The exception is financial lines, where we expect either flat or reducing rates in FY24, continuing the trends seen over the past 6 months.

Considering the profitability for the commercial lines market on an underlying basis, we think that all commercial classes are currently performing at better than target returns, off the back of the significant rate increases. When putting this together with our premium rate and claims cost forecasts, we therefore expect FY24 to still meet target returns, however it will be lower than FY23.

Read OptimaLite 2023

Read our free-to-download OptimaLite 2023 publication.