Australian insurers solvency ratio Executive summary (TL;DR)

• Australia’s largest general insurers — QBE, Insurance Australia Group (IAG) and Suncorp — have reported resilient capital positions in their most recent public results, and APRA’s industry statistics show the broader general-insurance sector remains comfortably capitalised on aggregate.

• Global groups that operate in Australia (for example Zurich and Allianz) report strong group solvency metrics under their home-jurisdiction regimes (Swiss Solvency Test / Solvency II) which generally indicate solid capacity to support the Australian operations.

• The Australian Prudential Regulation Authority (APRA) uses its own capital framework for life and general insurers (including the Prescribed Capital Amount or PCA for general insurers). Comparing insurers therefore requires care — look at APRA metrics for Australia-incorporated insurers, and group solvency (SST / Solvency II) for overseas parents.

This long-form article explains (1) what solvency means in the Australian context, (2) how regulators and market participants measure it, (3) the solvency profiles of major Australian insurers (QBE, IAG, Suncorp) and major global groups operating in Australia (Zurich, Allianz), (4) what to watch in solvency reporting and stress scenarios, and (5) practical steps for investors, brokers and policyholders to assess insurer strength.

1. What do we mean by “solvency ratio” — and why it matters

“Solvency” for an insurer is shorthand for whether the company has enough capital and reserves to meet its obligations to policyholders now and in stressed scenarios. Unlike banks, insurers’ liabilities (claims) are long-tail, uncertain and dependent on catastrophe events (floods, cyclones, bushfires), investment returns and underwriting cycles. Regulators therefore require insurers to hold capital buffers so they can withstand severe but plausible shocks.

Key reasons solvency matters:

• Policyholder protection. Capital cushions reduce the risk that an insurer cannot meet claims after large disasters.
• Regulatory compliance and licensing. Regulators (APRA in Australia) can intervene — from increased supervision to capital directions — if capital falls below required levels.
• Market confidence. Strong solvency metrics lower the chance of rating downgrades and provide headroom for growth, dividends and reinsurance purchases.
• Pricing and competition. An insurer with limited capital may pull back from underwriting certain risks or increase premiums.

But “solvency ratio” is not a single universal number: jurisdictions use different approaches (APRA’s PCA for Australian general insurers; Solvency II in the EU; the Swiss Solvency Test for Swiss groups; Bermuda and other regulators use different metrics). That means apples-to-apples comparisons require care.

2. How solvency is measured in Australia

Two short points about the Australian regulatory framework.

2.1 APRA and the Prescribed Capital Amount (PCA)

For Australian general insurers, APRA requires entities to hold eligible capital at least equal to their Prescribed Capital Amount (PCA). APRA’s PCA framework is an economic capital approach that looks at insurer-specific risks (underwriting, reserving, catastrophe, credit, operational, investment) and sets a capital requirement designed to withstand severe shocks. APRA often reports industry aggregate measures and publishes guidance and data on capital adequacy.

(Practical note: APRA sometimes publishes an industry PCA coverage ratio — the ratio of the industry’s eligible capital base to the industry’s aggregate PCA — which is a helpful barometer of sector‐wide resilience.)

2.2 Group regimes: Solvency II, Swiss Solvency Test (SST), Bermuda and others

Many insurers operating in Australia are subsidiaries of international groups. These groups report solvency under their home regimes:

• Solvency II (EU) reports a Solvency Capital Requirement (SCR) and a Solvency II ratio (available capital / SCR).
• Swiss Solvency Test (SST) produces an SST ratio used by Swiss groups (e.g., Zurich).
• Bermuda and other jurisdictions use their own capital models and may report “capital coverage” metrics.

Group solvency is important because a well-capitalised parent can support local operations (through capital injections, reinsurance or liquidity), whereas weak group capital can constrain local insurer actions.

3. Which Australian insurers currently show strong solvency — headline findings

Below I summarise solvency positions of the largest Australian general insurers and notable global operators with Australian businesses.

Important: the solvency picture evolves with quarterly and annual results, catastrophe losses, reinsurance placements and regulatory updates. The citations below reference recent company reports and APRA/industry commentary available at the time of writing. For the largest Australian groups we rely on their FY or HY public disclosures and APRA commentary.

3.1 QBE Insurance Group (Australian-listed, global operations)

• What they report: QBE publicly discloses an APRA PCA multiple (or indicative PCA multiple) that summarises its capital coverage against APRA’s Prescribed Capital Amount for its Australian legal entities (and in some reports an indicative PCA multiple for the group consolidated view). Recent reporting showed QBE’s indicative PCA multiple at 1.86x as at 31 December 2024, up slightly from 1.82x the prior year — signaling comfortable capital coverage with some headroom above regulatory minimums. QBE’s half-year and full-year reporting emphasise capital management (dividends, buybacks), reinsurance placements and catastrophe provisioning.

• Why it matters: A PCA multiple near or above ~1.5–1.8x (depending on the company’s risk appetite and APRA expectations) is generally viewed by markets as a healthy buffer; QBE’s 1.86x indicates it had near-term headroom to absorb shocks and still meet APRA capital requirements, while also pursuing returns to shareholders.

3.2 Insurance Australia Group (IAG)

• What they report: IAG — a major player in Australia and New Zealand — has emphasised strengthening its balance sheet in recent reporting cycles. Its FY25 results highlighted improved profitability and a stronger capital position following years of disciplined underwriting, catastrophe recoveries and capital management activity. IAG’s investor materials for FY25 reported a strengthened balance sheet and continued focus on maintaining “strong” capital metrics.

• Why it matters: IAG is a systemic insurer in the Australian market; its ability to maintain capital buffers matters for competition and industry stability. The company has historically managed catastrophe risk via reinsurance programs and retained capital targets.

3.3 Suncorp Group

• What they report: Suncorp — another major Australian insurer with banking and general-insurance operations — reported a robust capital position in its FY25 materials, including group capital tables and CET1/CAPITAL metrics for the banking/life sides of the business. Suncorp’s public investor pack and FY materials indicate a deliberate capital strategy and reported capital positions above internal minima.

• Why it matters: Suncorp’s size and exposure to Australian weather catastrophes make its capital strength critical. Suncorp has historically operated with explicit capital targets (and sometimes capital returns when headroom exists).

3.4 Global groups with Australian operations — Zurich and Allianz

• Zurich: The Zurich Group (Swiss-headquartered) reported an SST ratio in the mid-200s percentage points (e.g., 253% as of Dec-2024) in its group disclosures — a strong solvency position under Swiss rules. Zurich’s global strength provides scope for local support if needed.

• Allianz: Allianz Group’s Solvency II and SFCR disclosures show Solvency II ratios well above regulatory minima (group Solvency II ratios have ranged in the ~200% area in recent reporting), indicating broad global capital strength. Allianz’s global solvency strength helps underpin its operations in Australia.

Bottom line: On the most recent public evidence, the largest Australian insurers (QBE, IAG, Suncorp) and major global groups operating in Australia (Zurich, Allianz) report strong capital positions by their chosen metrics — signalling overall market resilience. APRA’s aggregate industry statistics show the sector’s total eligible capital covers prescribed capital at a comfortable multiple (industry PCA coverage ratios reported in industry commentary).

4. Deep dive: company-by-company analysis and how to read the numbers

Below I walk through how to interpret the numbers published by each major insurer, what to look for in their disclosures, and caveats.

4.1 QBE — “indicative PCA multiple” and what it implies

• Reported metric: QBE’s FY24/FY25 disclosures include an indicative PCA multiple (1.86x as at 31 Dec 2024). This is QBE’s internal estimate of the ratio of eligible capital to the PCA for the relevant entities.
• Interpretation: 1.86x indicates there is approximately 86% more eligible capital than the prescribed minimum (PCA). It’s comfortably above 1.0 (APRA minimum), and within ranges where management might consider shareholder returns conditional on risk appetite and regulatory expectations.
• Things to check in QBE reporting: trend (is the multiple rising or falling?), composition of eligible capital (shareholders’ equity, subordinated debt), catastrophe reserves & catastrophe reinsurance terms, and any one-off capital actions (dividends, buybacks, capital raisings). QBE’s half-year and full-year reports also discuss PCA sensitivity to large catastrophe events.

4.2 IAG — strengthening balance sheet narrative

• Reported metric: IAG’s FY25 reporting emphasised a stronger balance sheet and improved profitability. While IAG’s investor packs may present different capital metrics (statutory net assets, free capital, reinsurance recoverables), the market looks for clear disclosure on PCA coverage where applicable, reinsurance spend, and internal capital targets.

• Interpretation: IAG’s public statements that balance sheet strength has improved typically reflect both profitable underwriting and active capital management. For IAG, watch the combined operating ratio (COR), catastrophe losses, and reinsurance renewal terms — these affect capital through retained earnings and risk transfer costs.

4.3 Suncorp — group capital and CET1 for banking arm

• Reported metric: Suncorp’s FY25 materials include group capital tables and mobilisation of capital across insurance and banking parts of the group. The group targets and CET1 for the banking arm are important because Suncorp is a diversified financial services group, not a pure insurer.

• Interpretation: A robust CET1 buffer gives the banking arm strength, while group insurance capital adequacy is judged by available capital vs prescribed capital for insurance legal entities. Suncorp’s capital returns in FY25 indicate management judged capital headroom available after addressing regulatory and prudential needs.

4.4 Zurich and Allianz — reading global solvency for local relevance

• Zurich: Reports a Swiss Solvency Test (SST) ratio well in excess of 200% in recent filings (e.g., ~253% as of Dec-2024). That is a strong group solvency position under Swiss rules.

• Allianz: Allianz’s Solvency II / SFCR reporting also shows a strong regulatory ratio (often north of 200% in group reporting).

Why global ratios matter for Australia: Australian subsidiaries of global groups generally operate under local capital requirements (APRA). But a well-capitalised parent provides optionality: reinsurance, capital injections, intra-group reinsurance, or access to international capital markets. Thus, strong group solvency is a practical positive for local operations — but investors and policyholders should still confirm the capital position of the local legal entity and any intra-group support agreements.

5. APRA’s aggregate picture and the broader industry

APRA publishes industry data and commentary on general insurance performance and capital adequacy. Recent industry reporting and commentary (industry press citing APRA data) indicate the total eligible capital base for general insurers rose to a multi-billion dollar level and the industry prescribed capital amount coverage ratio has been reported around the high-1.x region (for example, an industry coverage ratio around 1.89x was reported in recent commentary), pointing to continued solvency across the sector.

What to watch in APRA data:

• Industry PCA coverage ratio — a rising ratio suggests stronger sector capital; a falling ratio signals less headroom.
• Catastrophe provisions and reinsurance costs — large catastrophe events (bushfires, floods, cyclones) push claims higher and can reduce capital through underwriting losses; reinsurance renewals after heavy losses can increase costs and reduce profitability.
• Regulatory changes — APRA periodically consults on capital frameworks and may update capital requirements (e.g., for life-insurance annuities or investment risks), which can shift required capital levels.

6. Practical guidance: how to evaluate an insurer’s solvency position (step-by-step)

If you’re an investor, broker, or informed policyholder, here’s a practical checklist for comparing insurers’ solvency.

Step 1 — Look at the legal entity and regulatory metrics

• For Australia-incorporated general insurers, seek APRA-aligned metrics (PCA multiples, eligible capital). Otherwise, check the local statutory financials and APRA disclosures.

• If the insurer is a subsidiary of a global group, also read the parent’s Solvency II / SST / group solvency reporting.

Step 2 — Read the latest annual & half-year reports (capital tables)

• Look for explicit numbers: eligible capital (Tier 1 equity, other eligible capital), prescribed capital amount (PCA), and the multiple/ratio. Check trend lines (last 2–3 reporting periods). QBE, IAG and Suncorp all report these or closely related capital tables.

Step 3 — Examine catastrophe and reserving positions

• Are there large outstanding catastrophe claims? Are reserve strengthening items flagged? Reserve releases increase capital; reserve strengthening reduces it.

Step 4 — Review reinsurance programs & costs

• Reinsurance is the insurer’s primary tool to limit peak catastrophe losses. Check the level of catastrophe cover, attachment points, reinstatement provisions and the counterparty quality (rating) of reinsurers.

Step 5 — Check capital management actions

• Dividends, share buybacks, subordinated debt issuance and capital returns tell you management’s view of capital adequacy. Frequent capital returns imply confidence — but could reduce buffers if underwriting weakens.

Step 6 — Read rating agency commentary

• S&P, Moody’s and AM Best provide independent assessments of insurer capital adequacy. These ratings incorporate capital, liquidity, underwriting strength and asset risk.

Step 7 — Consider macro & climate exposures

• Insurers in Australia face concentration risks from severe weather events and climate change; consider geographic concentration of underwriting (e.g., large exposure to north-eastern coastal regions prone to cyclones).

7. Common pitfalls & misinterpretations on Australian insurance solvency

• Comparing different metrics: Don’t directly compare an APRA PCA multiple with a Solvency II ratio or a Bermuda coverage percentage — they’re different calculations with different risk measures and calibrations. Compare APRA metrics with APRA metrics where possible, and compare Solvency II with Solvency II for international peers.

• Single-period snapshots: A single reported ratio can mask volatility — look at trends across multiple quarters and the insurer’s stress testing/ORSA (Own Risk and Solvency Assessment) disclosures.

• Group vs local entity: Global group solvency strength does not automatically mean the local legal entity is equally well capitalised; legal and regulatory boundaries exist. Always check the local legal entity’s position.

• Rating agency nuance: Rating agencies incorporate forward-looking judgement; their opinions may differ from simple ratio analysis.

8. What recent market events mean for solvency (contextual solvency factors)

Several structural and cyclical elements have influenced insurer solvency in recent years:

8.1 Catastrophe frequency & severity

Australia’s exposure to bushfires, floods and cyclones has increased catastrophic claims volatility. Insurers that manage catastrophe risk through reinsurance, underwriting discipline and pricing tend to preserve capital. Catastrophe seasons cause sharp capital swings.

8.2 Reinsurance market dynamics

Reinsurance rates shift with market cycles — a “hard” reinsurance market (post-loss) increases costs and can compress underwriting results, while a soft market eases pressure. Insurers that secure multi-year catastrophe protection and diversify reinsurers help stabilise solvency.

8.3 Investment markets & interest rates

Insurers hold large investment portfolios; changes in interest rates and asset valuations change the value of technical reserves and capital. A rising interest rate environment helped some insurers via higher investment returns, boosting retained earnings and capital. Conversely, weak markets can erode capital.

8.4 Regulatory change

APRA’s consultations on capital frameworks, especially for life-annuity products, can change capital requirements and therefore the reported solvency position. Keep an eye on APRA consultation outcomes.

9. Case studies & illustrative scenarios on Australian insurance solvency

Below are short illustrative vignettes showing how solvency metrics operate in practice.

Case A — QBE after a large catastrophe season

• Pre-event: QBE reports an indicative PCA multiple of ~1.86x.
• Shock: A severe cyclone season triggers large claims; reinsurance covers part of the loss but attachment points and reinstatement costs bite.
• Outcome: QBE’s capital declines; management can deploy reinsurance recoveries, adjust dividend policy, issue subordinated debt or raise equity to restore target PCA multiples. The existence of ~1.86x pre-event gives buffer to absorb losses without immediate recapitalisation.

Case B — A global group (Zurich) with a strong SST ratio supports a local arm

• Pre-event: Zurich Group reports an SST ratio of ~250% — strong group capital.
• Shock: The Australian subsidiary faces elevated claims. The parent’s robust capital and access to global debt/reinsurance markets enable timely reinsurance or liquidity support. However, legal separation between entities and APRA’s local prudential rules still require local compliance.

These cases illustrate why both local and group metrics are important.

10. What investors and policyholders should monitor next (timing & indicators)

• Quarterly & half-yearly results for QBE, IAG and Suncorp — check for PCA multiples, combined operating ratios, catastrophe losses, reinsurance renewals and capital returns.
• APRA quarterly industry statistics — track aggregate PCA coverage ratios and changes in industry eligible capital.
• Reinsurance renewals (often annual) — rising reinsurance prices are an early sign of potential pressure on underwriting profitability and capital.
• Rating agency reports — downgrades or negative outlooks are early flags.
• Regulatory consultations — APRA consultations on capital rules can change capital requirements.

11. Conclusions — who “maintains strong solvency ratios” in Australia?

Short answer: The largest Australian insurers by public reporting — QBE, IAG and Suncorp — have reported capital positions that, at the time of their most recent disclosures, show comfortable buffers against APRA’s prescribed capital requirements and industry shocks. QBE’s indicative PCA multiple of ~1.86x and the messaging in IAG and Suncorp’s FY25 disclosures reflect healthy capital management and headroom. APRA’s aggregate industry statistics likewise indicate industry capital coverage above regulatory minima.

• Global operators: Zurich and Allianz report very strong group solvency metrics (SST / Solvency II ratios in the ~200%+ range), which supports their ability to back local operations — although local APRA metrics remain the definitive guide for Australia-incorporated entities.

• Caveats: Solvency is dynamic. Large catastrophes, reinsurance price shocks, investment losses or regulatory changes can materially affect capital positions between reporting dates. Always check the latest company HY/FY reports, APRA industry releases, reinsurance renewal notes and rating-agency commentary.