Kemsley Brennan
Partner & Practice Group Leader

Kemsley Brennan is a Partner and Practice Group Leader in MinterEllison’s Complex Liabilities, Insurance and Regulation department. Kemsley has over 25 years’ experience in acting for multinational insurers and reinsurers. He has been recognised as a leading individual in the Legal 500 Asia Pacific and recommended in Best Lawyers as a pre-eminent Australian insurance lawyer.

Kemsley’s practice extends to insurance and reinsurance front end advisory and management of complex insurance disputes and claims. With the front end advisory work, Kemsley has acted for a number of insurers and reinsurers advising on complex insurance and reinsurance regulatory compliance issues including scheme transfers and Royal Commissions.

Sophie Whalley
Lawyer

Sophie Whalley is a Lawyer in MinterEllison’s Complex Liabilities, Insurance and Regulation department. She advises insurers, reinsurers, policyholders and corporate and government clients across the insurance and reinsurance sector, acting on both front end advisory matters and back end disputes and claims.

Sophie advises on governance, regulatory compliance and contractual arrangements, including insurance and reinsurance policies, indemnities and liability assessments. She works across general liability, property and professional lines, advising on coverage issues, statutory and contractual interpretation, claims strategy and the resolution of related commercial litigation.

James Stanton
Senior Associate

James Stanton is a Senior Associate in MinterEllison’s Complex Liabilities, Insurance and Regulation department. James has over 15 years’ experience across front end advice and back end litigation expertise in the general, life and reinsurance market. His background spans professional indemnity, public and products liability litigation, D&O and management liability, ISR, life insurance and two Royal Commissions.

He has worked in-house with several international insurers, reinsurers and financial institutions. His practice also covers insurance coverage class actions, corporate & financial services advisory, multi-party contract disputes, Australian Consumer Law, policy drafting and corporate risk advisory (private entity, government & NGO).

(Re)insurance industry overview and market outlook

The (re)insurance framework in Australia

Underpinning (re)insurance in Australia is a dual framework comprising a comprehensive statutory regime and a common law system of legal interpretation. From a statutory perspective, the financial services sector at large falls within the Federal jurisdiction. That is, the Federal Government manages financial services regulation on behalf of all Australian States and Territories. At the common law level, both the Federal Courts and each Court of the respective States and Territories have jurisdiction to interpret (and modify, where applicable) the operation of the statutory framework.

Two government agencies perform regulatory duties in respect of general insurance in Australia:

• The Australian Prudential Regulation Authority (APRA) administers the Insurance Act 1973 (Cth), which dictates prudential standards. The Insurance Act expressly includes reinsurers and effectively includes any insurance provider authorised to provide general insurance services in Australia. APRA has the power to authorise such insurers to carry on general insurance business in Australia. It may also revoke such authority. The regulatory scheme established by APRA requires strict adherence by general insurers, which includes the maintenance of adequate capital reserves to meet actual and expected claims costs.
• The Australian Securities and Investments Commission (ASIC) administers the Insurance Contracts Act 1984 (Cth) (ICA). ASIC has the general power under that Act to do all things that are necessary or convenient to be done in connection with administration of the relevant legislation. It has additional supervisory powers to:
• obtain insurance documents (whether issued or proposed) from insurers;
• review insurers’ organisational structures and administrative arrangements;
• intervene in any proceedings relating to a matter arising from the Insurance Contracts Act or insurance product standards in medical indemnity insurance contracts; and
• promote the education of the insurance industry and consumers as to the objectives of the Insurance Contracts Act.
• ASIC, as the market conduct regulator, is also responsible for licensing and monitoring the corporate conduct of general insurers and their intermediaries. It exercises a consumer protection function under both the Insurance Act and the Life Insurance Act 1995 (Cth).

Market cycles

The modern law of insurance in Australia is designed to balance the interests of insureds and insurers, although movements and amendments to the law over the past decade can be said to better favour insureds. The substantive law under the ICA is more favourable to an insured than the common law alone. For example, there are several consumer protection provisions included in the ICA. Although those are beneficial to insureds, they also present difficulties and uncertainty for insurers in relation to the potential outcome of an insurance claim. Those sections are as follows:

• Section 31 – in any proceedings where there is an allegation of fraudulent failure to comply with the duty of disclosure or fraudulent misrepresentation, the court may allow the insured to recover the whole amount that would have been payable if the contract had not been avoided or such part as the court thinks fit.
• Sections 37A-37E – certain contacts, particularly in relation to flood events, have higher standards and obligations imposed upon an insurer when explaining coverage to an insured.
• Section 53 – any provision permitting an insurer to unilaterally vary a contract of insurance is void.
• Section 58 – insurance cover is automatically extended if an insurer fails to notify the insured of non-renewal or expiration of cover.
• Section 63 – an insurer cannot cancel a contract of general insurance and any reported cancellation would be in contravention except as provided by the ICA itself.

Within this legal and regulatory landscape, the Australian general insurance and reinsurance markets in 2025-2026 were shaped by a convergence of pressures. Particularly with regard to the relatively insured-friendly legislative provisions for natural disasters, Australia witnessed an increase in natural catastrophe activity, most notably the North Queensland floods, Ex Tropical Cyclone Alfred, and the Mid North Coast and Hunter floods, alongside a hardening global reinsurance cycle and the continued impact of legacy long-tail claims from the pandemic era. These pressures are reflected in claims experience across the market.

Data published by the Insurance Council of Australia in mid‑2025 indicated that insured losses from extreme weather events in the first half of the year alone exceeded A$1.8 billion across nearly 150,000 claims. Ex Tropical Cyclone Alfred was the most significant event, generating more than 125,000 claims with an aggregate incurred cost of approximately A$1.36 billion. The North Queensland floods accounted for a further A$274 million in losses, while the Mid North Coast and Hunter floods contributed an additional A$194 million.

More recently, the January 2026 Victorian bushfires further underscored the scale and severity of Australia’s natural peril exposure. Burning across rural Victoria over approximately one week in early January and affecting around 100,000 hectares of land, the fires resulted in an initial industry loss estimate of A$786 million across property and motor hull lines, according to insurance research database PERILS. Coming after six consecutive years of predominantly “wet” catastrophe activity, including floods, cyclones and severe convective storms, the Victorian bushfires served as a stark reminder of the persistent and material bushfire risk confronting the Australian market.

Against this backdrop, climate change continues to test the sector’s capacity. Escalating catastrophe losses have driven higher costs and tightened reinsurance capacity, while insurers are increasingly turning to alternative risk transfer mechanisms, including catastrophe bonds and parametric insurance, supported by growing appetite from institutional investors. In parallel, the cyber insurance market has continued to expand rapidly, with reinsurers supporting sustainable growth amid rising and increasingly systemic cyber threats. Across the sector, the integration of insurtech and data‑driven underwriting is reshaping how risk is assessed, priced and transferred.

Key issues and ESG considerations

Australia’s approximately 2.5 million small businesses account for almost half of private sector employment. Rising exposure to extreme weather, inflationary pressures and increasing regulatory complexity have, however, driven up the cost of the insurance on which these businesses rely. According to the Insurance Council of Australia, insured losses from extreme weather have averaged more than A$4.5 billion per year since 2020, while construction costs have increased by approximately 40 per cent over the same period. These trends have materially increased claims severity and volatility, placing sustained pressure on insurance affordability, particularly for small businesses operating in high‑risk locations.

At the same time, businesses are increasingly exposed to evolving risks associated with the rapid adoption of digital technologies, including artificial intelligence. While digital transformation has delivered operational efficiencies and new commercial opportunities, small businesses are often more vulnerable to cyber risk due to lower levels of cyber literacy and limited resources. The growing prevalence of automated and increasingly sophisticated cyber‑enabled attacks has heightened both the frequency and severity of cyber incidents, further contributing to insurance cost pressures.

State‑based taxes and levies have compounded these challenges. The Insurance Council of Australia reports that taxes can add between approximately nine and 40 per cent to the price paid by customers, with state governments collecting A$8.9 billion in insurance taxes in 2024-25. This amount exceeded the industry’s total profits over the same period by approximately A$1.6 billion. These imposts increase premiums without reducing underlying risk, exacerbating affordability concerns for households and small businesses.

These combined pressures have had a direct effect on insurance premiums across the market. Sustained extreme weather losses have driven higher reinsurance costs globally, with reinsurers increasing prices to levels not seen in over two decades. Australian insurers have faced reinsurance cost increases of up to 30 per cent. As reinsurance is a fundamental component of insurers’ cost structures, particularly in catastrophe‑exposed markets, these increases have flowed through to higher premiums for policyholders.

4. Recent developments

4.1. Response to the climate crisis and a hardening market

The Australian regulators, at both prudential and compliance levels, are attuned to the systemic implications of climate risk. As outlined above, the prudential authority is APRA and the compliance and governance agency is ASIC.

At the prudential level, APRA has adopted a proactive approach to risk mitigation. In July 2023, APRA commenced the Insurance Climate Vulnerability Assessment (ICVA), a forward‑looking exercise designed to model how climate change may affect insurance and reinsurance costs through to 2050.

The ICVA was developed in collaboration with Australia’s five largest general insurers, being IAG, Suncorp, Allianz, QBE and Hollard, which together account for approximately 80 per cent of the general insurance market by gross written premium. These participating insurers are required to model future insurance affordability outcomes under two climate scenarios, as well as a baseline scenario, and to provide those results to APRA. The exercise reflects a shift away from reliance on historical loss data alone towards scenario‑based analysis that captures longer‑term physical and transition risks relevant to insurers and reinsurers.

At the time of writing, APRA has indicated that a public report based on the findings of the ICVA is expected in the first quarter of 2026. The report is intended to enhance understanding of how climate‑related risks may influence the affordability and availability of general insurance over the medium term. In particular, it is expected to inform governments, insurers, reinsurers and the broader community about how premiums and coverage may evolve as climate impacts intensify, supporting more informed planning and policy responses.

In parallel, from a compliance and governance perspective, ASIC has issued Regulatory Guide 280 (RG280) on sustainability reporting, providing guidance to assist entities in complying with new mandatory climate‑related financial disclosure requirements introduced by the federal government in September 2024. From 1 January 2025, the largest corporate entities and emitters (Group 1) have been required to disclose detailed information concerning their climate‑related risks and opportunities. For smaller entities the regime is brought into effect on a staged basis, with Group 2 entities reporting from 1 July 2026 and Group 3 entities from 1 July 2027.

ASIC’s guidance in RG280 clarifies how the directors’ duties regime across Australia applies in the context of climate disclosures. RG280 also outlines expectations for the preparation of forward‑looking climate information and explains the operation of approaches where climate statements are reproduced or summarised in other corporate reports. Insurers and reinsurers need to be aware of this when assessing risk in both their own governance and the governance of their insured entities. RG280 has the potential to impact current and future governance and disclosure of climate assumptions underpinning underwriting, pricing, reserving and capital management decisions.

Taken together, both from a prudential and compliance lens, these developments reflect a broader evolution in Australia’s regulatory response to climate risk, moving from a predominantly reactive focus on post‑event pricing impacts towards a more forward‑looking emphasis on scenario analysis, transparency and resilience.

Regulatory reform of the reinsurance sector

APRA has undertaken a targeted review of the prudential framework governing reinsurance for general insurers, with the objective of improving access to a broader range of reinsurance arrangements while maintaining prudential soundness and policyholder protection. In October 2025, APRA released a response paper setting out refined proposals following industry feedback on a consultation letter issued in November 2024. The revised proposals reflect a more developed understanding of how reinsurance, including alternative arrangements, is used in practice and represent a recalibration rather than a wholesale redesign of the framework.

The central aim of the proposed changes is to ensure that the prudential framework does not unnecessarily inhibit access to cost‑effective reinsurance, particularly during periods of market stress. APRA has identified that aspects of the existing framework can complicate or delay the recognition of capital benefits from alternative reinsurance structures, even where those arrangements provide genuine risk transfer.

A key component of the reform concerns the treatment of reinstatement requirements in capital calculations. Under the current framework, reinsurance arrangements are generally expected to include reinstatement, meaning the ability for cover to be restored after exhaustion by a claim. This assumption can prevent insurers from recognising capital benefits from arrangements where reinstatement is not typically available. APRA therefore proposes to remove the reinstatement requirement for arrangements, such as catastrophe bonds, where reinstatements are generally unavailable. This change aligns capital treatment with market practice and removes an unnecessary barrier to alternative reinsurance.

APRA has also proposed changes to the capital treatment of single‑peril reinsurance. Rather than calculating capital requirements by reference to the largest single peril, APRA now proposes a net whole‑of‑portfolio approach for reinsurance that does not provide whole‑of‑portfolio coverage. This approach applies reinsurance to every simulated catastrophic event first, capturing differences in reinsurance coverage by region or peril, and then determines the largest retained loss at the required probability level.

To enhance efficiency and reduce regulatory burden, APRA also proposes to limit the circumstances in which APRA approval is required for the capital treatment of reinsurance arrangements. Less complex arrangements would be assessed by the Appointed Actuary in accordance with prudential standards, with APRA approval reserved for arrangements involving greater complexity, material basis risk or interactions between capital charges.

Looking forward

The Australian insurance and reinsurance market is entering a period of structural adjustment in the face of continuously evolving ESG risk. Climate‑driven loss volatility, rising claims costs and sustained pressure on reinsurance capacity bring into focus the limitations of (re)insurers relying on historical experience alone. In response, regulators and market participants are increasingly focused on forward‑looking risk assessment, resilience and adaptability.

Over the coming years, scenario‑based analysis, enhanced disclosure and more flexible (re)insurance structures are likely to play a central role in shaping market outcomes. APRA’s climate vulnerability work and targeted reinsurance reforms signal an expectation that insurers and reinsurers will actively engage with longer‑term risk horizons, rather than treating climate risk as an episodic or external factor.

Affordability concerns are expected to remain a defining challenge, particularly for households and small businesses exposed to natural hazards. Premium pressure driven by extreme weather losses, inflation and taxation is unlikely to abate in the near term, placing greater emphasis on risk mitigation, capital efficiency and coordinated responses across government and industry.

As Australia’s insurance and reinsurance framework continues to evolve, greater emphasis is being placed on earlier risk identification, clearer disclosure and robust governance. Regular and informed engagement between insurers, reinsurers and insureds will be increasingly important to ensure risks are well understood and priced on a sustainable basis.