Automobile
Market conditions remained moderate-to-challenging. Price increases were in line with inflation, with further increases added to loss-impacted placements, due to rising claims costs and continued supply chain issues. Pricing for high hazard and heavy motor vehicle fleets was exposure-driven. Insurer focus on ESG targets sharpened, and underwriting guidelines were modified to achieve ESG goals. Insurers leveraged flexible underwriting as a differentiator for in-appetite risks while loss-active risks experienced a more conservative and rigorous underwriting environment. Retention-focused underwriters offered greater incentives such additional fleet unit adjustment costs. Minimum deductibles continued to increase as insurers sought to reduce attritional losses. Looking ahead, Taiwan-China tensions may lead to further delays in semi-conductor chips, impacting car supply and, in turn, affecting the ability of insurers to service claims. Claims impacted risks will experience more challenging market conditions. Client focus on structuring their policies to achieve the optimal balance between coverage and pricing is expected to increase.
Casualty/Liability
Insurers sought growth but remained cautious as they continued to focus on pricing adequacy and coverage terms in the face of social inflation and other loss-increasing factors. Rates increased across the portfolio – with poor performing risks experiencing the most significant impacts - and reviews of minimum pricing on excess layers. Premium increases rose in proportion with increased turnover/exposure as insurers focused on longer-term portfolio sustainability. Insurers reviewed capacity, and in some cased reduced it, especially where there were USA exposures. Aimed at de-risking their portfolios, some insurers sought to reposition to smaller risks; however, capacity remained generally sufficient. Referral underwriting became more prevalent for some industry sectors and insurers raised questions related to contractual exposures, indemnities and hold harmless clauses- highlighting the importance of quality submissions and granular information. Limits remained stable, although many insureds conducted limit profiling exercises to reaffirm limit setting rationale that had in many cases been decided in a soft market. Challenges continued around sexual misconduct, bushfire liability, frequency exposed business, large worker to worker risks and mining - especially, thermal coal – and some coverage reductions were mandated. Looking ahead, insurers will remain focused on disciplined underwriting aimed at maintaining profitability across the portfolio. There will be an enhanced focus on partnering with the right insurer that can grow with a client over the longer term, meaning sustainable pricing levels will need to be set.
Cyber
The Australian Cyber market remained limited with the majority of larger or more complex risks requiring substantial capacity from global markets. The challenging global market conditions seen in recent years continued to moderate in Q1. Although underwriting remained rigid and underwriters continued to require extensive, detailed risk information, price increases generally decelerated, and coverage restrictions relaxed, particularly for companies demonstrating strong cyber risk controls. The overall trend was a strengthening of appetite and capacity. Key underwriting concerns around systemic correlated events, territorial scope, and war continued but were largely unchanged from previous reports. Looking ahead, current market conditions are expected to continue.
Directors and Officers
The market transition that began in 2022 continued. While the claims environment remained active, improved rate adequacy served to broaden insurer appetite which brought new capacity into the market – particularly from London insurers - and improved pricing outcomes for many insureds, especially on low attachment excess layers. Incumbent insurers sought to maintain their participation on programs, and portfolio growth gained importance, especially for risks not providing entity cover for securities class actions (Insuring Clauses AB only). Risks falling within appetite experienced increased underwriting flexibility while larger and more complex risks saw greater underwriting rigor, especially in the areas of emerging risk (ESG, including Cyber governance) and economic factors including supply chain, debt profiles, and inflationary impacts. Securities Class Action activity remains an ongoing concern for insurers and the legislative and claims environment is being closely monitored. Capacity retractions at prior renewals led to rigorous interrogation of the adequacy of limits and the appropriateness of ring-fencing of limits between insuring clauses, especially for purchasers of entity securities coverage (“Side C”). This process has been supported by Aon’s data and analytics including detailed benchmarking and loss modelling via the Aon Decoder. Notwithstanding the additional capacity now available within the market, most risks renewed at expiring limits. Insurers were more open to coverage negotiations on wordings to secure preferred programme positions. Looking ahead, a further easing of market conditions is expected; however, ongoing economic and claims volatility will continue to be in focus for insurers as they reassess their budget projections and future appetite.
Marine
As post pandemic related issues in the supply chain continued to ease, market conditions improved. Capacity was strong across the broader cargo market, but for Stock Throughput, larger risks with high static limits experienced challenging local market conditions and often needed capacity from Singapore and London markets. Well performing risks experienced small increases, while under-performing risks experienced more significant increases. Natural Catastrophe exposed locations faced a rigorous underwriting environment in light of the events occurring across Australia in last 6 months. Capacity in the transit market was sufficient. Appetite was healthy, with most insurers open to writing strong lead positions or offering up larger follow positions. Demand for Stock Throughput coverage strengthened; however, only a handful of insurers offered true Manufacturers Output (MOP) risks and the market was very narrow where expanded polystyrene (EPS) exposure was present. Underwriting became more rigorous as respects static risk, particularly for storage sites located in Natural Catastrophe exposed locations. Requests for site surveys as well as significant amounts of COPE information was required in order to persuade insurers to consider underwriting the risk. Deductibles on standalone cargo risks remained steady; however, in the Stock Throughput market, deductible increases were imposed, particularly for Natural Catastrophe exposed locations with separate retentions for flood and fire losses. The Communicable Disease exclusion and Cyber Exclusion remained on all Cargo and STP placements. In addition, ‘Blocking and Trapping’ exclusions were introduced, and sub-limits pertaining to expediting expenses and additional expenses became more common. Looking ahead stand-alone cargo rates are expected to remain steady, with a potential easing of rates expected later in the year, barring any significant GA or container losses between now and then. The market for static risk may become slightly more challenging, especially for risks with locations exposed to Natural Catastrophes.
Professional Indemnity
Professional Indemnity experienced a two-speed market. While a stabilization occurred for some sectors, challenges continued for others. Preferred risk types experienced increased competition and flat renewals while more challenging risk types – especially those with poor loss experience – saw capacity constraints and significant premium increases with new program capacity priced disproportionately higher than existing capacity. London markets showed an increased appetite for Australian business but were very cautious in the deployment of that capacity and have not shown interest in re-entering the market for more challenged industries. Across the board, insurers were disciplined as they sought to stay ahead of losses – both new claims and the development historical claims. Insurers focused on the sustainability of their portfolios and careful consideration was given to individual client circumstances and exposures, including claims history. Contractual risk management remained an area of focus, including indemnities, fitness for purpose terms, and subcontractor management. Submission quality was critical to achieving superior outcomes.. Deductibles remained under scrutiny, although several years of upward pressure has seen deductibles start to moderate. Insurers continued to refine their positions on Silent Cyber. Looking ahead, current market conditions are expected to continue.Portfolio sustainability will remain top of mind, resulting in strong underwriting discipline and a focus on risk selection. Submission quality will be key for all, but especially challenged, risks.
Property
Insurers sought growth but were cautious as their flight to profitability continued. Following a challenging Treaty renewal season, insurers faced pressure to properly price and manage their portfolio Catastrophe aggregates with estimated impact of these renewals still being quantified. The two-tier market continued with diverging pricing outcomes for preferred and non-preferred risks. Non-catastrophe exposed, low hazard occupancies experienced a favorable market, where pricing reached alignment to technical pricing adequacy while high hazard or poorly risked managed and claims affected risks experienced more challenging market conditions. Line sizes were under review as insurers managed natural catastrophe aggregation and exposures across portfolios. Capacity remained sufficient although tight for challenging risk types such as Waste Management, Food & Beveridge, and Coal as well as for some Cat-exposed geographies. Insurers also increasingly challenged valuations, supply chain exposures and Business Interruption methodologies and imposed co-insurance/average provisions in the absence of a clearly defined valuation approach. Insurers exited certain industries and risk types due to local and global portfolio remediation. Flood definitions were expanded to incorporate pluvial flood – surface water vs escape from water course – something that buyers should be wary of in carrier selection. Looking ahead, insurers are expected to continue to impose modest rate increases and will deploy Natural Catastophe aggregate conservatively.
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