Agenda 1 2019 General Insurance Barometer J P Morgan Insurance Siddharth ParameswaranAC 61 2 9003 8629 Siddharth x parameswaran J P Morgan Securities Australia Limited Julian Braganza 61 2 9003 6098 julian m braganza J P Morgan Securities Australia Limited See the end pages of this presentation for analyst certification and important disclosures including non US analyst disclosures J P Morgan does and seeks to do business with companies covered in its research reports As a result investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report Investors should consider this report as only a single factor in making their investment decision Taylor Fry Consulting Actuaries Kevin Gomes 61 2 9249 2918 kevin gomes au Taylor Fry Consulting Actuaries Scott Duncan 61 2 9249 2905 scott duncan au Taylor Fry Consulting Actuaries Asia Pacific Equity Research February 2020 a 2 Overview This is the eight edition of The Barometer a joint effort between J P Morgan and Taylor Fry This Powerpoint reports the results from a survey of industry participants and APRA statistical data that covers Detailed product information for the current period and industry expectations for the next year covering issues such as premium rate trends capacity changes claims trends loss and expense ratios Perceptions of product profitability Distribution trends Practitioner views on key issues affecting the industry and particular classes Brokers perceptions of underwriters We have also written a report that includes an article summarizing key numerical findings from the report as well as several articles exploring key issues raised within the survey or explored by ourselves as key challenges the industry faces This report can be found here and is supposed to be read in conjunction with this powerpoint presentation The publication of The Barometer continues from 19 editions of the J P Morgan Deloitte General Insurance Survey the last of which was published in 2012 for the year to 2011 with the first edition of the Barometer published the following year The 2019 J P Morgan Taylor Fry General Insurance Barometer provides a detailed overview of the current state of the Australian general insurance industry and the industry s expectations The report conveys analyses on the key elements of the industry from the perspective of direct underwriters and brokers including About the Barometer Agenda 3 Big Picture Industry Issues 2019 Industry Summary Underwriters Cyclones to pick up in Northern NSW and Southern QLD Split of perils costs to insurers by cause since 1967 adjusted for inflation and exposure to 2017 Source ICA data Global climate variability normalisationto 2017 values is based on inflation and notional exposure adjustment as calculated by the ICA Source ICA J P Morgan 14 Climate change Bushfires to be more intense and frequent extreme cyclones and thunderstorms to pick up three degree warming to result in 52 average increase in costs Hail IAG s predictions on hail trends by region from 3 degree warming Varying tropical cyclone regional trends 3 degrees scenario Source IAG Source IAGSource IAG Overall IAG view on change in annual average loss from climate change for different temperature warming scenarios on average perils cost by region Source IAG 15 Climate change and the bushfires IPCC findings IPCC 2012 report on climate change IPCC 2012 report predicted more extreme heat cyclones drought and bushfires in Australia In 2012 the IPCC released the Special Report for Managing the Risks of Extreme Events and Disasters to Advance Climate Change Adaptation SREX report which brings together the latest research on climate change and extreme events Key findings from the SREX report included 1 It is virtually certain that the world will experience a decrease in cold extremes and an increase in the frequency and magnitude of warm extremes over the 21st century 2 It is very likely that mean sea level rise will contribute to upward trends in extreme sea levels in the future 3 It is likely that the frequency of heavy precipitation will increase over many areas of the globe Key findings from the SREX report for Australia included Hot weather days Australia had already observed an increase in warm days and a decrease in cold days This trend is projected to continue with large scale increases in the number of days over 35 degrees Celsius and 40 degrees Celsius and an increase in heatwave duration Flood Risk Extreme rainfall events were projected to increase Cyclones were likely to become more intense and shift southwards however the frequency of tropical cyclones could remain unchanged or even decrease Drought Since the 1950s there had been an observed increase in drought over the south west and south east of Australia with projections indicating this would continue Bushfires In south east Australia the frequency of very high and extreme fire danger days is expected to rise by 15 70 per cent by 2050 The f