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While the March quarter saw Australian insurers post a quarterly loss of $997m after tax, APRA statistics released for the June quarter reveal a market turnaround, with a net profit of $1.0bn after tax. Improved loss ratios and slight gains from investment returns were the main drivers of this result. Despite this, Property & Casualty underwriters continue to focus on overall portfolio management, which includes:- pricing adequacy- risks in catastrophe zones (bushfire, cyclone, flood)- ‘sideway’ exposures such as prevention of access- higher Worker to Worker deductibles- tightening of cover (infectious disease exclusions).In addition to upward premium pricing for primary and excess layer(s), casualty underwriters have been undertaking remediation actions across their portfolios. As with property, casualty underwriters’ portfolios continue to see deterioration in loss ratio(s) brought on by claims frequency, long term inadequacy of pricing, broadened cover and the rising cost of claims (e.g. higher prevalence of litigation). Rate increases of between 10-20% are being witnessed on primary layers with excess layers seeing reasonably calmer pricing increases of 5-10% at this stage.
As we move into the summer months, the regular seasonal risks are present: bushfires in the southern states with cyclones, windstorms and flooding in the north. This season is widely tipped to see La Niña conditions return to eastern Australia, meaning increased rainfall and a risk of more tropical cyclones forming across parts of Queensland. Insurers may apply policy adjustments by broadening flood and named cyclone sub limits or may mitigate their own risk through the purchase of reinsurance. This last strategy will invariably come at a cost, which will be passed on to clients either in part or in full. High performing or clean risks remain desirable and continue to see more favourable pricing outcomes.
From a casualty perspective, we expect the current trends to continue over Q2. Insurers will be taking a much firmer stance on their capital deployment and could lead to a reduction in capacity on certain risks. Coverage provisions are also being reviewed, especially those considered non-traditional that have crept in over the past few years, including Cyber and Professional Indemnity.
Insurers require greater levels of information to adequately underwrite risks, especially on those accounts where they are not active/current participants. With insurers reducing their capacity, many clients are now required to market their program to new insurers, many of which are unfamiliar with the specific risks of that business. A quality submission with updated risk information is key to achieving a positive outcome and a powerful point of differentiation from others, especially in industries deemed high risk. From a property perspective, unprotected food & beverage is still considered high risk, even more so for those with bushfire or cyclone exposure. Liability risks subjected to the highest level of scrutiny are those in the commercial cleaning, asbestos removal, contractor/labour hire sector as well as Global Liability programs with risks domiciled in the US.
Feel free to reach out to discuss your situation and address any questions or concerns.
National Head of Corporate Insurance & Risk
+61 434 651 918
