Insurance Facts and Figures 2012

Transcription

1 pwc.com.au Insurance Facts and Figures 2012 June 2012 Scan the QR code to download FS Connect as a free App for your ipad Download QR Reader app from App Store.

2 Editor: Scott Fergusson Publication Team: Kudzaishe Tagwireyi Michelle Oliver Tony Kamberi Contributors: Scott Hadfield Christopher Verhaeghe Sarah Long Naomi Jones Roland Fan Andrew Smith Michael Bibas Samuel Lee Peter Kennedy Nadisha Mataraarachi Voula Papageorgiou Scott McKay Lee Hudson Adele Yee Bayne Carpenter Andrew McPhail Renae Cooper Anna Donoghoe Billy Bennett Magalie Engelmann Gavin Nathan Praveena Karunaharan Insurance Facts & Figures PricewaterhouseCoopers. All rights reserved. PwC refers to the Australia member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see for further details. This publication is designed to provide an overview of developments the accounting, tax and regulatory environment relating to insurance in Australia. Information contained in this booklet is based on the law and Government announcements as at 21 April This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. Liability limited by a scheme approved under Professional Standards Legislation. PwC Australia helps organisations and individuals create the value they re looking for. We re a member of the PwC network of firms in 158 countries with close to 169,000 people. We re committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at WL

3 Contents 02 Foreword 04 Accounting and regulatory update Taxation Sectors in update review

4 Foreword Scott Fergusson We are delighted to share with you PwC s Insurance Facts & Figures for It focuses on the key developments in accounting, regulation and tax for the insurance industry over the past year as well as providing on analysis of the general, life and health insurance sectors in Australia. 4 Insurance Facts and Figures 2012

5 It is also exciting to present this edition in an App version as well as in pdf. By being part of PwC s FS Connect App series, users of Facts & Figures can also easily explore the broad range of current thought pieces produced by PwC on the insurance, banking and asset management sectors. People working in the insurance industry should be proud of how they help contribute to Australia and its community. This has been clearly demonstrated in the industry s excellent response to recent catastrophes, and is reflected in the life industry s ongoing Lifewise initiative. Despite this there is an ongoing need to improve the public perception around the value of insurance so that more Australians are encouraged to participate in seeking protection. While the FSC, ICA and Private Healthcare Australia are working to address this, never before has the need to focus on the customer been so strong for insurers. With changing customer behaviour and the effect of digital disruption to distribution methods, winners in the industry will be ones that have a better understanding of the customer and that take an outside-in view to value propositions and operating models. To help with your thinking about how global trends may impact the insurance industry, please see our white paper Insurance 2020: The Future of Insurance on the App, website, or through your usual PwC contact. On behalf of the PwC Insurance team, I trust you find this edition of Facts & Figures of value. Scott Fergusson PwC Australia Insurance Leader PwC 5

6 G General Insurance L Life Insurance H Health Insurance Accounting and regulatory update 1 The following section provides an update on key changes to accounting and regulatory requirements for insurers since the previous Insurance Facts and Figures in May Life and General Insurance Capital (LAGIC) review G L Background APRA is now in the latter stages of reviewing its capital standards for general insurers and life insurers. APRA s objective is to improve the risk-sensitivity of the capital standards and to harmonise the approach across all APRA-regulated industries where appropriate. The review process commenced in May 2010 and has involved the majority of insurers participating in two quantitative impact studies and over 120 submissions on the proposals provided to APRA. On 31 May 2012, APRA released its latest Response to Submissions paper along with eleven final prudential standards relating to the calculation of the prescribed capital amount for both general and life insurers. On 31 May 2012, APRA also released draft prudential standards on the composition of the capital base for general and life insurers and draft revisions to other prudential standards reflecting amendments that largely stem from the capital standard changes. Capital requirements The implementation of the final and remaining proposed prudential standards will affect the capital requirements of all insurers and while the impact on capital requirements for many insurers will be modest, for a small number the impact may be material. In the industry s most recent submissions on APRA s proposals, some of the key areas of focus included the quality of capital limits in determining Tier 1 and Tier 2 capital, the internal capital adequacy assessment process, how and when the supervisory adjustment would be determined by APRA, how to apply asset risk charge rules, and the treatment of life company deferred acquisition costs and deferred tax assets for capital purposes. 6 Insurance Facts and Figures 2012

7 On 14 March 2012 APRA communicated to general insurers that the commencement of the horizontal requirement of the insurance concentration risk charge (ICRC) would be deferred to 1 January This was in response to industry concerns around the potentially significant capital burden of the requirement and the time required to implement a suitable strategy to satisfy this requirement. Insurers will still need to address in their ICAAP in 2013 how they will meet the horizontal requirement by 1 January On 30 March 2012, APRA released a letter to life insurers describing APRA s proposals for the measurement of illiquidity premiums in discount rates where annuity liabilities have illiquidity characteristics, for example where the only insurance risk relates to longevity and servicing expenses. Internal Capital Adequacy Assessment Process (ICAAP) Aside from the calculation of the revised capital requirements the implementation of the ICAAP is a new challenge for insurers this year. The ICAAP is an ongoing process to be adopted by insurers to manage their capital levels according to the levels of risk in the business. The ICAAP will vary in complexity depending on the nature of the insurer, will need to address all aspects of the insurer s capital adequacy framework, and will need to be overseen by the Board. The most effective ICAAPs will be those that enable management to support the Board in understanding the changing profile of risk in the business, the sensitivities around these risks, and making decisions around capital levels in the context of the insurer s risk appetite. Other notable changes Among the broad range of other changes to the prudential standards as part of the LAGIC review are the requirement for general insurers to submit their FCR and ILVR within three months of year end as opposed to four, the requirement for life insurers to take responsibility for capital rather than this being the responsibility of the Appointed Actuary, and the incorporation of the ICAAP process into the risk and reinsurance management strategies. These changes, along with the rest of the LAGIC package, clearly have a broad and deep impact on the governance structure, operational, risk and reporting processes of insurers. Timing Comments on the draft prudential standards released on 31 May 2012 are due to APRA on 27 July Draft reporting standards, forms and instructions will be released by APRA for comment in June 2012 with submissions due on these in August. APRA anticipates having issued all final prudential standards by October The final prudential standards will be applicable from 1 January 2013, with the exception of the horizontal requirement of the ICRC which will apply from 1 January Where insurers do not expect to be able to comply with the revised standards in time, they may apply for transitional arrangements which APRA will consider on a case by case basis. These submissions must be made before 30 September PwC 7

8 APRA release of consolidated prudential standards G L On 12 September 2011, APRA released in final form four consolidated prudential standards on governance, fitness and propriety, outsourcing and business continuity management that will consolidate and replace 12 existing standards across the authorised deposit-taking (ADI), general insurance and life insurance industries. The consolidated standards closely reflect the existing industry-specific prudential standards, with minor amendments to clarify requirements and ensure consistent application across industries. The consolidated standards will be effective from 1 July Natural Disaster Insurance Review recommendations released G On 14 November 2011, Assistant Treasurer Bill Shorten released the recommendations of the Natural Disaster Insurance Review, which encompass flood risk management, insurers claims-handling and dispute resolution processes, and the provision of flood insurance. Under the review s proposals, every Australian seeking to purchase or renew home and contents insurance will be offered flood cover, but will have the option to opt out. The recommendations include: A standard definition of flood All insurers must offer flood cover as part of home building and home contents insurance policies, while giving consumers the opportunity to opt out of that cover The Government will spend up to $12 million to establish a flood risk information portal A one-page key facts sheet to explain the major aspects of a policy A reinsurance pool for high-risk properties Lending institutions to remind borrowers annually of their obligation to be insured Reforms to the General Insurance Code of Practice. The ICA has agreed to changes to the General Insurance Code of Practice, and one of the key changes to the Code relate to clear timeframes for claims handling, including during declared catastrophes. The ICA has also committed to releasing future Code Compliance Committee reports that emcompass a legislated standard definition of flood. 8 Insurance Facts and Figures 2012

9 APRA releases final package for refinements to the prudential framework for general insurance groups G On 5 October 2011, APRA released the final package relating to refinements to the prudential and reporting standards for general insurance groups. The refinements to the prudential framework address minor issues identified since the implementation of APRA s prudential framework for the supervision of general insurance groups in Refinements to the reporting framework align aspects of general insurance group reporting with the reporting framework for individual APRA authorised general insurers. The refinements reflected in the final prudential and reporting standards are largely consistent with APRA s proposals in the May 2011 discussion paper. The prudential standards were effective from 1 December The reporting standards became effective for reporting periods ending 31 December ASIC clarifies requirements for telephone sales of general insurance products G On 28 October 2011, ASIC made class order relief to change the time for giving a Product Disclosure Statement (PDS) for a general insurance product when a retail client seeks a quote for the product during a telephone call. Under the relief, the client can choose to receive the PDS, and, if they do, the general insurer or intermediary must give a PDS as soon as practicable after the quote is given. This means that the PDS can be given after the telephone call. The relief given by ASIC does not affect the time at which a PDS must be given if a quote is given during an unsolicited telephone call, or is otherwise unsolicited by the retail client. This relief seeks to balance the consumer protection interest of retail clients with industry concerns about compliance costs. PwC 9

10 ASIC seeks improvement in CCI sales practice G L On 19 October 2011, ASIC issued a report of findings and recommendations from its review of how consumer credit insurance ( CCI ) is sold. The recommendations cover the areas of sales practices, disclosure, training programs and monitoring systems. In its review of sales practices, ASIC identified the following risks: Consumers not being made aware that they have purchased CCI or that CCI is optional Consumers not being asked whether or not they wish to purchase CCI Consumers not being eligible to claim on all components of the CCI policy they have purchased The potential for consumers to be pressured or harassed by sales staff, and Consumers not understanding the cost or the duration of the CCI policy. ASIC has made 10 recommendations to improve the way in which CCI is sold in Australia so consumers are better informed and more confident in deciding whether or not to purchase CCI. ASIC plans to conduct a further review of claims handling and insurer practices for CCI, and industry has indicated support for the second stage of the review. The Financial Services Council has committed to produce guidance for life insurers that issue CCI, based on any relevant recommendations arising from both stages of the review. Future of Financial Advice (FOFA) L In August and September 2011, the Assistant Treasurer and Minister for Financial Services and Superannuation, Bill Shorten, released the two tranches of draft legislation of the Future of Financial Advice (FOFA) reforms for public consultation. The draft legislation was subsequently tabled in Parliament in late 2011 and then referred to both the Parliamentary Joint Committee as well as the Senate Economics Committee for review. Both Committees have reported back, and are broadly in favour of the reform package, suggesting minor amendments or clarifications. Key aspects of the FoFA reform package include: A proposed ban on conflicted remuneration structures regarding the distribution and provision of advice for retail investment products including managed investments, superannuation and margin loans. This includes commissions and volume based payments in relation to these products. The legislation as currently drafted will prohibit commissions on risk insurance within Superannuation. However, General insurance or Life insurance outside of Superannuation are not caught by the prohibition on commissions. A proposed introduction of a best interests duty for advisors towards their clients. The duty will oblige advisers to act in the best interests of their clients and to place these ahead of their own when providing personal advice to retail clients, subject to a reasonable steps qualification. 10 Insurance Facts and Figures 2012

11 Providing ASIC with greater powers to refuse licences and ban advisers. The current threshold of will not comply will be amended to is likely to contravene, making it easier for ASIC to take action at both the licensing and ongoing supervision stages. While originally scheduled to commence 1 July 2012, the Government has recently announced a deferral of compulsory implementation until 1 July This is predominantly based on industry concerns that they require more time to prepare for the significant reforms, and also to allow industry to synchronise these reforms with the Stronger Super reforms. Churning in life insurance L The Financial Services Council (FSC) announced on 4 August 2011 that the Council would issue a Standard to address the practice of churning in life insurance. Churning is a practice whereby consumers with an existing life insurance policy are sold a new policy by a financial adviser that has no net benefit for the consumer. Key reforms under this Standard will include: The removal of takeover terms (that is, banning the practice of the relaxation of the standard underwriting process for replacement business) for a policy or a group of policies that are transferred by an adviser between insurers; and The establishment of a consistent adviser responsibility period across the industry of two years with 100 per cent commission clawback if the policy lapses with an insurer within one year, and 50 per cent commission clawback if the policy lapses with an insurer during the second year. The new policy will see financial advisers being paid a level commission if replacement business is arranged. According to the FSC, replacement business occurs where a financial adviser makes arrangements for a client to replace an existing individual life, lump sum benefit or income protection policy with a new policy of the same kind within five years from the commencement date of the original policy. FSC s policy on churn would also see the removal of takeover terms for a policy or a group of policies that are transferred by a financial adviser between insurers. The FSC will consult with financial advice and life insurance industries on the policy and aims to implement a framework by 1 July PwC 11

12 National Disability Insurance Scheme H On 4 December 2011, the Australian Labor Party announced that the adoption of a National Disability Insurance Scheme (NDIS) and a National Injury Insurance Scheme (NIIS) would be a key policy platform for the Party with a view to implementing the Scheme effective The Australian Government had asked the Productivity Commission to undertake a public inquiry into a long-term disability care and support scheme. The Commission recommended the NDIS in its final report to the Government on 31 July The NDIS would provide insurance cover for all Australians in the event of significant disability, funding of which would be a core function of government, akin to Medicare. In addition to funding long-term high quality care and support for people with significant disabilities, some of the other aims of the NDIS would include providing frameworks for linking community and people with disabilities and for supporting best practice among providers. The NIIS would provide insurance cover for the lifetime care and support needs for all people who experience a catastrophic injury. Means Testing of Government Rebates for Private Health Insurance H The three Fairer Private Health Insurance Incentives Bills were approved by the Senate in March 2012, meaning that from 1 July 2012, the rebate will be means tested based on earnings. There will be no change for single tax payers under 65 earning $84,000 or below (families: $168,000), who will retain the full 30% rebate. However, this change will phase out the private health insurance rebate for higher income earners as follows: Tier 1: Single tax payers under 65 earning between $84,001 $97,000 (families: $168,001 $194,000) will receive a 20% rebate; Tier 2: Single tax payers under 65 earning between $97,001 $130,000 (families: $194,001 $260,000) will receive a 10% rebate; and Tier 3: Single tax payers under 65 earning more than $130,001 (families: $260,001) will not be eligible for any rebate. For ages over 65, the maximum rebate amount will remain the same as the current legislation. That is, a 35% rebate for ages and 40% rebate for ages 70+ with the same income thresholds noted above phasing the rebate to nil. The Department of Health and Ageing has estimated that 99.7% of people with private health insurance hospital cover will keep their insurance, however 27,000 of these people will reduce their level of cover. 12 Insurance Facts and Figures 2012

13 Annual premium rate increase approved by government H The Minister for Health approved an increase in private health insurance premiums by an average of 5.06% effective 1 April 2012 (2011: 5.57%). This saw a range of rate rises between 2.19% and 7.85%. Whilst this is the lowest rate rise in four years, it is worth noting that over 70% of health insurers were asked to resubmit their applications prior to the finalisation of the overall pricing process. The main reasons cited by insurers in their price increase submissions are current and forecast increases in benefit outlays. More specifically, this includes the increasing costs of treatments and services, and higher utilisation of treatments and services. Medicare Levy Surcharge increase 1 July 2012 H The changes arising from the Fairer Private Health Insurance Incentives Bills also increases the MLS on a tiered approach. For Australian tax payers who do not have private hospital cover the following MLS will apply: Single tax payers earning $84,000 or below (families: $168,000) will not be charged the MLS Single tax payers earning between $84,001 $97,000 (families: $168,001 $194,000) will remain at 1% Single tax payers earning between $97,001 $130,000 (families: $194,001 $260,000) will increase from 1% to 1.25% Single tax payers earning more than $130,001 (families: $260,001) will increase from 1% to 1.5%. PHIAC Prudential Standards H PHIAC has sought comment on a draft Outsourcing Standard. This standard will require insurers to have appropriate policies, risk management, approvals and notification to PHIAC in relation to their outsourcing arrangements. This draft standard was open for comment until 6 April This was the second consultation period PHIAC have offered after taking into account 15 submissions from the first consultation period. PHIAC continues to work on a range of other prudential standards. PwC 13

14 IFRS for Insurance Contracts Exposure Draft G L H Since the comment letter period for the Insurance Contracts Exposure Draft ended on 30 November 2010, the International Accounting Standards Board (IASB) has been in extensive redeliberations following the large number of submissions from relevant stakeholders, and the change in IASB composition effective 1 July Whilst there was general support for a single global accounting standard, diverse points of view remain that are broadly split by geography and type of insurance. Also critical to the debate and ultimate outcome is the position to be taken by the SEC on convergance with IFRS. An announcement from the SEC is expected in second quarter of Given the level of changes being worked through, the IASB expects to re-expose the draft standard in the second half of Advertising in Financial Services G L H ASIC has released guidance to help product promoters comply with their legal obligations when advertising financial products and services. RG204 Advertising financial products and advice services: Good practice guidance was released in February ASIC Commissioner Peter Kell explained that the guidance will help industry participants understand their obligation. The Guide contains not only examples of good practice, but examples where industry practice fell short of ASIC s expectations. There are a number of examples of poor practice relevant to the insurance industry, such as: Comparing premiums with other products where there is a different excess Using misleading images (e.g. younger or older) to suggest that a product or price might be available to someone when age restrictions mean that person would not be eligible. Insurance Contracts Act Amendments G Amendments to the Insurance Contracts Act were passed by Parliament in March 2012, containing a number of measures to improve consumer understanding of insurance policies. One of the measures, the introduction of a Key Facts Sheet (KFS) for Home Building and Home Contents insurance policies, will allow consumers to quickly and easily check the basic terms of the insurance policy, including the nature of cover and any key exclusions. The introduction of KFS s will also help consumers to compare the features of various insurance policies and select appropriate insurance products for their needs. In February 2012, the Treasury released a discussion paper that seeks public comment on the content, format, structure and provision of the Key Facts Sheet. The other measure amended is the inclusion of a standard definition of flood, once this definition is incorporated into relevant Regulations. 14 Insurance Facts and Figures 2012

15 Privacy law G L H Privacy reforms have been discussed for a number of years, however we are yet to see a finalisation of the reforms. To recap, in June 2010 the Senate referred the Exposure Drafts of Australian Privacy Amendment Legislation to the Senate Finance and Public Administration Legislation Committee (the Committee) for inquiry and report. The exposure draft consists of 2 parts: Part 1 Australian Privacy Principles The exposure draft of the new Australian Privacy Principles (APP) will form a key part of the proposed amendments to the Privacy Act. The APP will replace the current Information Privacy Principles (for the Commonwealth public sector) and the National Privacy Principles (for the private sector). The Committee reported their views in June 2011, making 29 recommendations (mostly seeking to clarify or simplify the proposed legislation). Part 2 Credit Reporting In January 2011, the Minister for Privacy and Freedom of Information provided draft comprehensive credit reporting provisions to the Committee for review and tabling. This exposure draft contains new provisions relating to the collection, use and disclosure of credit reporting information and aims to simplify existing laws. The new scheme will be underpinned by a new industry-agreed Credit Reporting Code of Conduct (the Code) which will be subject to approval by the Australian Information Commissioner. Insurers who offer credit products will also be subject to the new amendments when they eventuate. The Committee reported in October At the time of writing, there is no firm indication of when the above Privacy reforms will be implemented.

16 G General Insurance L Life Insurance H Health Insurance Taxation update 2 The following section provides an update on key taxation changes or developments since May 2011 that are directly related to insurance activities. The US Foreign Account Tax Compliance Act (FATCA) G L H The Foreign Account Tax Compliance Act ( FATCA ) has been enacted and will apply to payments made after 1 January FATCA is designed to stop US tax avoidance known as round tripping, where US persons invest offshore and then into onshore US investments, reducing US tax. FATCA will apply to Foreign Financial Institutions ( FFIs ) and Non Financial Foreign Entities ( NFFEs ). Both are very broad terms and include providers of vanilla investment products, e.g. trustees of certain but not all superannuation funds and unit trusts, and these products will fall within the meaning of a foreign account. These US rules will impact Australian insurers investing (directly or indirectly) into the US. The US issued the FATCA regulations on 8 February The International Dealings Schedule (IDS) G L H Replacing the existing Schedule 25A and Thin Capitalisation Schedules, the International Dealings Schedule ( IDS ) will be required to be completed by all taxpayers commencing from the 2012 financial year. Many of the disclosures within the form will continue to target transactions specifically relating to the broader Financial Services (including Insurance) industry. Our experience to date through working with taxpayers engaging in completion of the IDS-FS in the 2011 pilot program was that preparing the schedule was often onerous and data intensive for taxpayers engaged in numerous and complex cross-border dealings. It is therefore recommended that taxpayers continue to assess the capability of their information and operating systems to capture the data required to complete the new schedule, as well as flagging potential areas of risk arising due to the information disclosed. 16 Insurance Facts and Figures 2012

17 ATO TOFA Compliance Activity L As alluded to in the ATO Compliance Program, the ATO has recently commenced the pilot of its TOFA Implementation Reviews by sending TOFA questionnaires to a number of taxpayers, seeking information in relation to a range of issues, including: identifying taxpayers who meet the TOFA threshold to ensure they are applying the TOFA rules; calculating the balancing adjustment for taxpayers who have made the transitional election; the validity of elections made under the TOFA rules; and the appropriate application of TOFA tax-timing methods. Stamp Duty and Life Insurance L The South Australian Court of Appeal handed down its decision in National Mutual Life Association & Ors v Commissioner of State Taxation [2011] SASCFC 106 on 30 September The Court of Appeal dismissed the appeal of the four insurers against assessments of stamp duty made by the South Australian Commissioner of Taxation. The Court found that the amount of stamp duty payable on life riders is the higher rate applicable to premiums relating to policies of any kind (other than life insurance policies) and not the lower rate of duty payable on premiums relating to life insurance. The relevant insurance duty provisions dealt with in this case were amended prior to the delivery of the decision. The amendments clarified the Commissioner s position that any premiums relating to life riders are payable at the higher rate of duty applying to life insurance. ATOID 2011/58: The Taxation of tax preferred Amounts G L H In July 2011, the ATO issued ATO Interpretative Decision ATO ID 2011/58. This ATOID indicates that tax preferred distributions made by a Managed Investment Trust (MIT) to an insurance company should be included in the unitholder s assessable income, as ordinary income. Insurance companies are distinguished from other entities by the fact that they hold their investments on revenue account. The ATOID states that the investment of funds is as much a part of the business as is the collection of premiums. Tax preferred amounts may include: a. income which is sheltered by non cash deductions e.g. building allowance (tax deferred amounts) b. capital gains realised by the trustee that are not included as assessable income (e.g. CGT concession amounts). We note however, the industry does not agree with the position adopted in this ATOID. The Financial Services Council has raised this with the ATO. PwC 17

18 Goods & Services Tax and Life Insurance L The ATO has been undertaking a coordinated Phase 1 review of GST Apportionment Methodologies adopted by Life Insurers in order to obtain a better understanding of the spectrum of approaches adopted in the industry. It is expected that the ATO will collate the results of its reviews to date and undertake further activity in this area in the near future. While no specific GST technical developments have occurred in recent times, the significant change in the industry as a result of the Future of Financial Advice Reforms (FoFA) will have significant GST implications. These implications include: technical GST considerations regarding the entitlement to input tax credits on payments made to advisers operational systems considerations regarding changes to GST coding, distinguishing between pre and post FoFA arrangements, GST accounting issues compliance considerations in relation to the correct GST commentary regarding PDS disclosures and unit pricing calculations. Draft GST regulation from Department of Transport case G H In response to the decision, the ATO has released an Addendum to the GST Ruling (GSTR 2006/11) which amends the ATO s previous views in relation to when insurers will be entitled to claim input tax credits (ie GST credits) in respect of certain claims expenses. The Department of Transport case caused significant unexpected implications for certain classes of insurance, the most notable being the health insurance industry. The commercial issue related to the potential increase in claims costs as a result of certain tripartite or third party payer scenarios between insurers and health service providers. Due to the significance of these implications, in March 2012 the government released draft legislation to address the issue. The draft legislation focuses on the GST treatment of GSTfree health services and proposes new legislative provisions that allow services provided to health insurers to be treated as GST-free rather than the current treatment where GST would apply (as a result of the recent GST case mentioned above). At the time of printing, the draft legislation is expected to be passed by Federal Parliament, however, due to the proposed wording of the new law, health insurers will need to actively review the implications of the options provided under the new legislation for their business. 18 Insurance Facts and Figures 2012

19 Sectors in review 3 PwC 19

20 General Insurance Scott Hadfield 2010 was a challenging year for insurers, 2011 proved to be even more so. Not only did the trend of natural disasters continue with events such as the Queensland floods, Cyclone Yasi and the Melbourne storms, but we also endured a weakening economic environment that saw yield curves fall. If one then overlays the additional reinsurance costs incurred in the form of reinstatement premiums for current year programs along with the inevitable increase in cost of the subsequent year s program, it is hard to see how to see how insurers could have had a worse year. 20 Insurance Facts and Figures 2012