What Australia’s insurance leaders predict for 2026: Insights from Drova’s new Insurance Outlook Report

The conversations shaping Australia’s insurance sector heading into 2026 reflect a wide range of professional perspectives. Insights captured in the report span senior executives, underwriting and risk leaders, technology specialists and operational teams - each bringing a distinct view of how pressures and priorities are shifting across the industry.

Those perspectives form the foundation of the newly released Drova Insurance Outlook Report 2026, which brings together insights from senior insurance executives, risk leaders, regulators, technologists and resilience specialists across Australia and the broader APAC region. Rather than offering a single thesis on where the industry is heading, the report reflects a range of expert viewpoints on what insurers are seeing, testing and prioritising as the operating environment continues to evolve.

Australian insurers are heading into 2026 with a mix of familiar challenges and emerging forces reshaping how the industry thinks about risk, regulation and resilience. That’s the message from the newly released Drova Insurance Outlook Report 2026, which highlights the themes expected to shape boardroom agendas and investment decisions over the next 12 months.

The result is a practical snapshot of an industry in motion - one where experience, data and forward-looking analysis converge to highlight what matters most in the year ahead.

Underwriting conditions tighten, but with strategic upside

Underwriting conditions remain demanding across several major lines, with elevated loss ratios in property, motor and specialty continuing to influence portfolio decisions. Inflationary pressures and higher reinsurance costs are still factors, even as some segments show signs of stabilisation.

What stands out in Drova’s 2026 Outlook is the speed at which conditions are now shifting. The report points to increasingly compressed underwriting cycles, reducing the time insurers have to adjust pricing, capacity and capital deployment. As a result, traditional reliance on historical loss patterns is proving less effective on its own.

Instead, the Outlook highlights a growing focus on more granular pricing approaches and scenario-led analysis, allowing insurers to test exposures under a wider range of plausible conditions. This shift reflects a broader move toward treating volatility as an operating assumption - something to be planned for systematically, rather than addressed after the fact.

For many insurers, this has practical implications for how underwriting, risk and finance functions interact, with forward-looking insights playing a larger role in day-to-day decision-making. The report suggests that organisations able to integrate these capabilities more effectively are better positioned to navigate tighter margins without sacrificing discipline.

Regulation: More focused, more integrated

Regulators across APAC are signalling a clear direction: insurers must demonstrate not just compliance, but operational resilience that can be evidenced and tested. Australia is no exception. With CPS 230 now in force, expectations around risk governance, data integrity and third-party oversight have sharpened, placing greater emphasis on proof rather than policy.

Drova’s report highlights three areas where insurers are likely to see heightened scrutiny in 2026:

• Scenario-based resilience assessments, particularly for critical operations and services
• Climate risk modelling and disclosure, extending into governance, capital and decision-making
• AI governance and control, as automated and agent-assisted workflows move into production

The message is not one of regulation for its own sake. The report reflects a supervisory focus on how risk frameworks operate in real conditions—whether insurers can maintain continuity, manage dependencies and respond effectively when disruption occurs.

Across contributor perspectives, regulation is increasingly viewed as reinforcing disciplines insurers need anyway: clearer accountability, better data, and more integrated operating models.

Climate risk: A more practical conversation than the headlines suggest

While climate-related losses remain elevated, Drova’s outlook shows the conversation moving beyond catastrophe response toward how insurers adapt their models, portfolios and controls to a high baseline of physical risk.

Australian insurers are increasingly incorporating climate considerations into underwriting, pricing and capital decisions, alongside growing disclosure expectations. The report highlights areas where progress is already visible, including:

• More granular hazard and exposure mapping
• Increased use of parametric and specialist solutions
• Greater engagement with prevention, adaptation and transition projects

The shift is not framed as eliminating risk, but as making it more visible, measurable and manageable. In that context, insurers are positioning themselves not only as risk carriers, but as participants in broader resilience and prevention ecosystems.

AI becomes operational, with controls in focus

If recent years were about experimentation, the report suggests 2026 is where AI moves firmly into everyday insurance workflows. Not through wholesale automation, but via agent-assisted tools that support people across claims, underwriting, compliance and customer service.

Use cases highlighted in the report include:

• Claims triage and quality assurance
• Fraud detection and anomaly identification
• Underwriting support and document analysis
• Customer engagement and service responsiveness

What differentiates more advanced organisations is not the sophistication of the tools themselves, but the strength of the governance around them. The report repeatedly emphasises the need for CPS-234-grade controls, clear accountability and human-in-the-loop decision-making as AI scales.

AI is positioned as an accelerant to human judgement—not a substitute for it.

Resilience moves from back-office concept to operating model

One of the clearest shifts in the 2026 Outlook is how resilience is being treated. Rather than sitting solely within risk or compliance teams, it is increasingly shaping decisions across technology, sourcing, distribution and customer experience.

The report points to several indicators of this transition:

• Critical operations and tolerances informing investment and sourcing decisions
• Third-party risk and resilience being managed as a single system
• Scenario-led discussions becoming more routine at executive and Board level

These capabilities, once seen as regulatory necessities, are increasingly influencing commercial priorities. The Outlook suggests that insurers able to operationalise resilience—rather than document it—are better positioned to manage complexity without slowing decision-making.

2026: A year for clearer choices

The overarching takeaway from Drova’s 2026 Insurance Outlook is not that risk is new or unexpected. Insurers are well aware of the volatility in their operating environment. What the report underscores instead is the importance of clarity: clearer priorities, clearer ownership and clearer insight into how decisions hold up under pressure.

Insurers that strengthen the links between risk, operations, technology and strategy will be better equipped to navigate the year ahead. Those still constrained by fragmented systems and manual processes may find that regulatory and commercial scrutiny moves faster than they can respond.

While the challenges are real, the Outlook is deliberately constructive. Across contributors, resilience is framed not as a compliance exercise, but as a strategic asset - one that builds confidence with Boards, regulators, partners and customers alike.