The state of the Australian group life/risk market became so parlous in 2013 that three major reinsurers stopped quoting on new Total and Permanent Disability (TPD) business, according to analysis provided by the Australian Prudential Regulation Authority (APRA).
The analysis, provided in its latest APRA Insights publications, has served to reinforce the depth of the problems which confronted the major life insurers and which have given rise to generally higher premiums across the superannuation industry.
It said that in response to the poor claims experience of the major insurers, that by the end of 2013 "three major reinsurers had ceased quoting for new TPD business, and quotations for TPD renewal business were generally conditional on minimal changes to contract terms," it said.
"Given that group risk business is typically a ‘bundled' package of TPD and death cover, this effectively meant a significant reduction in reinsurer capacity available to group risk insurers," the APRA analysis said.
It said that while there now appeared to be some interest from additional foreign reinsurers in writing business in Australia, the recent reduction in capacity has posed challenges for group risk insurers seeking competitive reinsurance quotations, resulting in significant premium increases for many group policies.