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The last quarter has seen further stabilisation within the property and liability insurance markets, as rate increases continue to moderate with insurers clawing back profit following a difficult natural catastrophe season (CAT) season in 2020-2021. Whilst the cost of transferring risk still favours the seller, the pricing pendulum has started to swing towards buyers. Longtail liability lines however are still seeing rate increases of 15-20%. Certain segments are seeing much higher increases. For example, purchasing molestation cover remains highly challenging, with markets withdrawing capacity and decreasing appetite for these types of exposures. Honan is continuing to guide clients through more sophisticated risk transfer and retention program structure options as a strategy to manage these risks, either by electing aggregate deductible structures to offset premium increases, or through non-traditional forms of insurance such as discretionary mutuals or captives.
In addition, the second COVID-19 Business Interruption (BI) test case was heard in the Federal Court recently, with the outcome handed down on October 8, 2021. An overview of the second test case, along with the key findings is available here. An appeal date has been scheduled for November 2021 - we’ll provide an update when that judgment is delivered.
As NSW and VIC commence their paths out of lockdown, clients in the hospitality, tourism and retail industries are expecting improved business results for the quarter ahead. Honan is working closely with clients as they navigate the complexity of returning to the office and liability exposures around the relevant State/Territory orders concerning vaccinated vs unvaccinated customers.
Australia's east coast experienced severe weather over the first weekend in October, a possible harbinger of events to come in the natural catastrophe (CAT) season. Meteorologists are again predicting equal chances of La Niña events, bringing with it a risk of associated storms and flooding. Marking the official onset of Australia's CAT season, October is the time for clients to work with their broker to ensure they’re adequately prepared. A CAT plan and undertaking preventative maintenance on your assets in advance are advisable at the beginning of Q2.
Insurers will continue to take a conservative approach to underwriting through pricing and capital deployment. For clients, this will mean insurance supply will continue to remain ample, leading to increased competition and further stabilisation of pricing. Following the Haynes Royal Commission, a raft of new financial services industry regulations come into effect in FY22 including the Claims Handling AFSL license requirements, revised Dispute and Complaints Processes, and the implementation of Target Market Determinations. The industry is preparing to implement new policies and processes designed to give greater protection to consumers, particularly retail clients.
