Reinsurance Explained: A Pillar of Strength for General Insurers 

With natural disasters becoming more frequent and severe, the paper explains why  reinsurance is a critical mechanism for insurance affordability.  

In Reinsurance Explained: A Pillar of Strength for General Insurers, Chief Actuary Kate Bible outlines why reinsurance matters to every Australian consumer and how recent global changes are reshaping the landscape. 

In brief: 

• Spending an estimated AUD 2.5 billion on reinsurance last year saved general insurers from needing up to AUD 70 billion in extra capital to cover natural disasters and other losses. 
• Secondary perils — severe thunderstorms, floods, droughts, wildfires and landslides — now cause more total global damage than primary perils such as hurricanes and earthquakes. 
• Climate change, population growth and rising rebuilding costs are fundamentally reshaping insurance costs across the industry. 
• Compared to their global peers, Australian insurers have fewer reinsurance options that receive regulatory credit, with APRA currently consulting on expanding access to alternative solutions. 

Why this matters now 

With global insured losses from natural disasters reaching USD 145 billion in 2024, and Australia experiencing AUD 8.3 billion in insured losses understanding how reinsurance works has never been more critical for consumers, policymakers and industry professionals.  

Dialogue Papers are a series of papers written by actuaries and published by the Actuaries Institute which aim to stimulate discussion on important, emerging issues. Opinions expressed in this publication are the opinions of the Paper’s author and do not necessarily represent those of the Institute.