Australia’s insurance market in 2026 is experiencing a period of transition. Commercial insurance conditions have generally softened across many classes, increasing competition and broadening insurer appetite. However, ongoing catastrophe losses, rising claim complexity, evolving cyber risks and heightened regulatory oversight continue to challenge insurers and insureds alike.
The Australian Prudential Regulation Authority (APRA) has identified operational resilience, AI-enabled cyber threats, third-party dependencies and geopolitical risks as key priorities for insurers, while the Insurance Council of Australia (ICA) continues to advocate for major investment in disaster resilience and mitigation infrastructure to address the growing cost of extreme weather events.
Industry Snapshot
Recent industry indicators demonstrate the changing dynamics of the Australian insurance market:
- More than 264,000 catastrophe-related insurance claims were lodged following major weather events occurring in late 2025 and early 2026.
- These events generated approximately $3.5 billion in insured losses, placing significant pressure on insurer profitability.
- Commercial property and casualty markets have largely entered a soft-market cycle, with increased competition and broader underwriting appetite for well-managed risks.
- Gross Written Premiums continue to increase as insurers adjust pricing to reflect climate, catastrophe and inflationary risk exposures.
- APRA has identified AI-enabled cyber threats, technology concentration risk and operational resilience as key supervision priorities for 2026-27.
- The Australian Securities & Investments Commission (ASIC) has identified insurance claims handling following extreme weather events as a key regulatory focus area.
- Insurers are increasingly deploying AI technologies to improve underwriting, claims management and fraud detection capabilities.
Hot topics
In 2026, we focus on four emerging issues affecting the Australian insurance market:
- Softening commercial insurance markets.
- Artificial intelligence, cyber risk and fraud.
- Catastrophe resilience and affordability.
- Regulatory scrutiny and operational resilience.
- Softening commercial insurance markets
After several years of significant rate increases, many commercial insurance classes have entered a softer market cycle.
Commercial property, professional indemnity, financial lines and many casualty risks are experiencing increased insurer competition and growing underwriting capacity. Insurers are becoming more selective in their pursuit of profitable growth, creating opportunities for insureds with strong risk management practices to achieve broader coverage and improved pricing outcomes.
However, not all sectors are benefiting equally.
Catastrophe-exposed property risks continue to attract close scrutiny, particularly in regions vulnerable to flooding, bushfire and cyclones.
Cyber and Directors & Officers liability markets remain highly competitive, with abundant capacity continuing to enter the market. While this has created pricing pressure for insurers, underwriting scrutiny remains focused on governance, cyber security maturity and incident response capabilities.
For brokers and insureds, the current market presents opportunities to revisit program structures, limits, deductibles and policy wordings while competition remains strong.
- Artificial intelligence, cyber risk and fraud
Artificial intelligence is rapidly transforming how insurers assess risk, manage claims and combat fraud.
Many insurers are now using AI-powered solutions to streamline underwriting, automate claim assessment, improve customer experiences and identify suspicious claims behaviour. These tools are helping insurers improve efficiency while managing increasing operational costs.
At the same time, cyber threats are becoming increasingly sophisticated.
ASIC and APRA have both highlighted AI-enabled cyber threats as a major concern for financial institutions. The combination of artificial intelligence, ransomware, social engineering attacks and technology-enabled scams is creating new challenges for insurers and policyholders.
Insurance fraud is also evolving. Insurers are reporting increasing use of manipulated documents, altered photographs and fabricated evidence during claims investigations. As fraud techniques become more sophisticated, insurers are increasingly using machine learning and advanced analytics to identify anomalies and detect potentially fraudulent activity.
Technology therefore presents both an opportunity and a risk. Insurers that successfully balance innovation, governance and cyber resilience will be best positioned to benefit from AI while managing emerging exposures.
- Catastrophe resilience and affordability
Extreme weather events continue to shape the Australian insurance landscape.
Major storm, flood and cyclone events occurring during late 2025 and early 2026 generated approximately $3.5 billion in insured losses and more than 264,000 claims. These events reinforced the growing challenge of maintaining affordable insurance coverage while responding to increasingly severe natural catastrophes.
The Insurance Council of Australia continues to advocate for long-term investment in disaster resilience. Its proposed $30.15 billion Flood Defence Fund seeks to reduce future losses through targeted flood mitigation infrastructure, resilience projects and strategic property relocations in high-risk areas.
The industry is also assessing the effectiveness of the cyclone reinsurance pool. Regulatory reviews have indicated that the scheme has helped moderate premium increases in higher-risk cyclone regions, although affordability challenges remain. This remains an important initiative as insurers continue to manage climate-related risk exposures.
Climate resilience is increasingly being incorporated into underwriting, pricing and risk mitigation strategies, creating both challenges and opportunities for businesses operating in high-risk environments.
- Regulatory scrutiny and operational resilience
Regulatory expectations continue to rise.
The implementation of Prudential Standard CPS 230 and the Financial Accountability Regime has significantly increased focus on governance, accountability and operational resilience. Insurers are expected not only to maintain policies and procedures but also to demonstrate their effectiveness during periods of disruption.
APRA’s 2026-27 supervision priorities include:
- AI-enabled cyber threats.
- Dependencies on critical technology platforms and service providers.
- Geopolitical and operational risks.
- Enterprise resilience and crisis management capabilities.
ASIC has separately identified claims handling as a key area of focus following recent weather events. Delays, communication failures and poor customer experiences continue to attract regulatory attention, particularly during large-scale catastrophe responses.
Operational resilience has therefore become a strategic priority across the insurance sector. Insurers are investing heavily in claims surge planning, cyber preparedness, business continuity programs and third-party risk management to ensure they can effectively respond to future disruptions.
Summary
The Australian insurance market in 2026 is characterised by increased competition, rapidly evolving technology and growing catastrophe exposures.
While many commercial insurance classes have entered a softer market cycle, insurers continue to face significant challenges arising from natural disasters, cyber threats, claim complexity and regulatory expectations. Artificial intelligence is transforming underwriting and claims management, while climate resilience and operational preparedness have become central to long-term market sustainability.
For insurers, brokers and insureds, the ability to adapt to these changing conditions and proactively manage emerging risks will be critical to success in the years ahead.
This article was written by Principal Lawyer Scott Kennedy and Client Engagement & Strategy Consultant Monique Purcell.
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