Insurers have set aside bigger provisions for householders insurance to manage unexpected adverse outcomes, according to Australian Prudential Regulation Authority risk margin data.

The householders line had an average 9.1% standalone outstanding claims liabilities risk margin and 14% premium liabilities risk margin for the year to June 30 2025.

APRA last provided an update for 2013, and in that period householders direct business had a standalone OCL risk margin of 6.9% and PL risk margin of 10.9%.

KPMG partner Grace Ng says increases in the OCL and PL margins “may reflect increased underlying uncertainty within the class, including greater exposure to natural perils, increased claims volatility, inflationary pressures and the growing impact of climate-related risks”.

OCL and PL risk margins show how much an insurer has put aside as a buffer for “worse than expected” outcomes, Ms Ng says.

Directors and officers cover had a standalone OCL risk margin of 23.2% and PL risk margin of 37.9%. The line used to be part of professional indemnity and now features separately under APRA’s revised class reporting framework.

Ms Ng told insuranceNEWS.com.au D&O had the highest standalone risk margin across all classes.

“This likely reflects the inherently uncertain nature of long-tail D&O claims, including exposure to large litigation events and class actions.”

Cyber is another new class in the industry risk margin statistics released this month.

It has an OCL of 14.7% and PL of 18.4%, which is roughly consistent with professional indemnity’s 15.7% and 19.6%, Ms Ng says.

The “diversification benefit” for the industry increased to 38.5% from 31.5% in 2013.

“This may reflect stronger diversification across insurers’ portfolios, driven by industry consolidation, broader product offerings, greater geographic diversification, and the development of more diversified business mixes across the market,” Ms Ng said.

She says while the general insurance landscape has evolved since 2013, the latest APRA data shows the overall level of risk margins has remained broadly consistent across most classes.

“Any movements should therefore be considered in the context of changes in market conditions, portfolio mix, emerging risks, claims experience and APRA reporting requirements,” she told insuranceNEWS.com.au.