Insurance Updates

In this update, we share practical insurance insights from the quarter that’s been, and forecasts for the quarter ahead.

 

KEY TAKEAWAYS FROM FY21: Q1?

The past quarter has seen an ongoing trend of strata residential premiums increasing by around 5-10% nationally. The commercial strata property increases have continued to trend higher (above 10%). Non-strata commercial property insurance underwent a 5% rate increase last quarter (on average) and will likely undergo slightly higher increases in the coming quarter.

Scrutiny over natural peril risk exposures relating to catastrophic events continued to drive premium increases. The fifteen-minute summer hailstorm in Canberra was potentially the most damaging “cost per minute” event of the past year for the strata industry. Fallout from the summer bushfires has considerably impacted commercial property rates and property in alpine risk locations.

 

KEY CONSIDERATIONS FOR FY21: Q2?

As the State election looms in Queensland, discussions have turned to Government taxes that are inflating North QLD premium. The QLD State’s Stamp Duty tax and Federal Government GST on North Queensland dwellings contribute a significant percentage of overall premiums.

In their November 2020 report, the ACCC will likely focus on further analysis and recommendations around exclusive insurer distribution agreements, third line enforcing and insurance commission in North QLD. The ACCC may also comment on the ongoing insurer exodus in North QLD, as the last quarter has seen another large international insurer cease writing risks in North QLD.

In NSW, increases to the compulsory NSW Emergency Services Levy (ESL) used to fund Emergency Services via property insurance premiums are pushing prices higher. Insurers have been required by government to increase their NSW ESL rates over the past quarter, these NSW Government ESL charges are seeing premium increases of approximately 5% across the State.

 

Example of 1 Oct 2020 NSW ESL increases from unspecified large NSW strata insurer:

Insurance Class ESL Increase From To
Commercial Strata 30.5% 39.5%
Residential Strata 15.5% 22.5%

 

The South Australia and Western Australia strata and commercial insurance prices continue to be among the lowest premium prices nationally. The Adelaide Earthquake and Perth hail and storm natural perils risks mean each insurer is pricing these locations in vastly different ways, some insurers have dramatically raised rates on new business in these locations, while other insurers are renewing with flat to minimal premium increases.

 

WHAT INDUSTRY TRENDS SHOULD CLIENTS MONITOR OVER THE COMING QUARTER?

Alpine and above the snowline areas in NSW and Victoria have become the new challenge areas for FY21. Honan has created a limited bulk property placement solution into international insurance markets to secure coverage options. Locally, the alpine locations have seen insurers (strata and non-strata) coming off risks completely or scaling back the limits they will provide for bushfire exposure. Consequently, Honan is placing bushfire locations with either a defined perils program or a combined limit basis into international insurance markets, using higher bushfire deductibles and excess solutions to secure coverage for snow lodges and strata buildings.

In Victoria, the pandemic will likely further impact the challenge of insuring unoccupied locations. Overall, the commercial property insurance rates have been steady at 5% rate increases over the past couple of years. Some movement above this 5% increase is now likely for a third of renewals.

 

 

We’re With You All The Way

Feel free to reach out to discuss your situation and address any questions or concerns.

 

Kieran Drum

National Head of Strata

kieran.drum@honan.com.au

0488 688 656

 

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