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Following the collapse of Catholic Church Insurance in May 2023 due to a lack of capital to fund new business and renewals, many Australian church and school organisations have been seeking last-minute insurance options from overseas markets. However, these markets have limited coverage for sexual abuse, including lower limits and minimal retroactive coverage. This will likely result in poor renewal outcomes for the next 12 months, as London markets have been flooded with requests for cover at short notice. Honan clients in this industry have the security of stable market partnerships based on long-standing, well-managed risk programs and we do not expect any impact on our client base.

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In May 2023, the first Australian Financial Complaints Authority (AFCA) decisions on the Covid-19 business interruption (BI) test cases were handed down, finding in favour of insurers in both cases. The critical question was on policy construction, with the requirement that the closure of the insured business must be due to orders from a competent government, public or statutory authority, and due to an outbreak of infectious human disease at the premises or within 20 kilometres of the premises. In both cases before AFCA, these criteria were not met adequately. Whilst each case before AFCA and the courts will be considered on its own merits, this decision reflects the insurance market’s positions that typical BI cover was not designed to cover pandemics.

Another 200 cases remain open for determination with AFCA, and there are four class actions listed before the Federal Court for late July 2023. We will be watching the outcomes closely and keep you updated with key insights.

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Increased bushfire risk remains a concern for the year ahead with the Bureau of Meteorology (BOM) predicting a possible El Niño event over the Australian summer. Whilst no contributing climate factors are certain, BOM is still forecasting drier and warmer conditions across much of Australia between July and September. Australian businesses with a bushfire exposure must ensure an adequate disaster recovery plan is in place, and work with their insurance brokers to ensure coverage is tested on limits for both material damage and indemnity periods for BI.

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It is not only the forecast for Australia that is under watch. In the first half of 2023, we saw global insurers try to claw back earnings after several catastrophic losses in the US, namely hurricanes, a cyclone, and storms. This impacted Australian risks, driving property rates and premiums upwards. From a global perspective, a predicted El Niño event in the North Atlantic may continue to fuel Australian property insurance rates. However, Colorado State University released an update in July, forecasting a “near average” year for named storms, hurricanes, major hurricanes, and accumulated cyclone energy consistent with the 1991-2020 average. If this forecast holds, it could help to slow the property insurance rate increase.

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Discover the full HoneIn Market Update here.