KEY TAKEAWAYS FROM FY22: Q1?
In September, the Australian Cyber Security Centre (ACSC) published its annual cyber threat report for the 2020-2021 FY, revealing total self-reported losses from cybercrime in Australia in excess of $33 billion. The escalating prevalence and severity of cyber attacks, along with changes in governance expectations, director liabilities, and regulatory reform is seeing business leaders place significantly more emphasis on their organisations’ cybersecurity and risk management strategies. Head here for our in-depth analysis of the cyber insurance market and updates across a range of different industries, including financial institutions, professional services, and technology.
Following consecutive years of rate increases, there is clear evidence pricing is beginning to plateau for the public company D&O insurance market. Whilst insurers still applied rate increases during the Q1 renewal period, these were much lower than the prior quarter. This suggests the corrective portfolio measures required in the D&O space have largely been achieved and pricing is reaching a sustainable level for insurers. Challenges remain for companies with poor financials and industries heavily impacted by COVID-19. The ability of brokers to differentiate these clients by communicating in-depth knowledge of their risk exposures and being able to provide quality information about their risk management and risk mitigation activities is crucial to securing positive renewal outcomes for clients.
The professional indemnity (PI) market remains challenging for certain professions, particularly design and construct professionals, digital banks, mortgage brokers, financial planners, and non-bank lenders. These professions still face supply and demand issues due to several insurers withdrawing from the market. Premium rates increased on average 15-20% in the last quarter, with insurers being highly selective in risks they choose to insure.
KEY MILESTONES / CONSIDERATIONS FOR CLIENTS FOR THE NEW QUARTER (FY22-Q2):
For management liability (ML) and insurable exposures for private enterprises, the full effects of COVID-19 remain unknown. As a result, underwriters are cautiously monitoring their portfolios and the solvency of Insureds. Crime and employment practices liability coverages continue to be the main triggers for ML claims, accounting for over 70% of combined losses for ML insurers.
In this hardening insurance market where demand outstrips supply, Honan is working to ensure all clients understand the outlook for their renewal programs to ensure the right level of cover for their organisation. Our insurer partners expect strong underwriting submissions, based on the best available information, in order to optimise the price, terms, and conditions for your risks.
ANY INDUSTRY TRENDS YOU CAN SEE ARISING IN OVER THE REMAINDER OF FY22?
At the forefront of renewal negotiations are cyber placements. These remain challenging for certain risks and risk management around ransomware attacks in particular. Insurance carriers and cyber underwriting practices continue to evolve from a traditionally narrow focus on factors such as revenue, number of employees, record count, and industry class, to a wider underwriting lens encompassing loss modelling tools and continual system scanning, both in-house and via outsourced IT security. Insurers are delicately balancing the growth of their portfolios, whilst remaining disciplined in the face of surging claims and declining profitability.
As always, engagement with your broker well in advance of renewal dates is essential.