Automobile
Market conditions were moderately challenging. Loss-impacted risks continued to experience price increases in line with rising insurer claims costs and supply chain issues. Insurers leveraged flexible underwriting as a differentiator for in-appetite risks while loss-active risks experienced a more conservative and rigorous underwriting environment. Looking ahead, inflationary pressures are expected to continue to impact loss costs. Replacement vehicles may become more difficult to source and the cost of shortages is expected to pressure policy benefits. 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
Casualty/Liability
Market conditions remained challenging. Portfolios were heavily impacted by social inflation, as well as IBNR and IBNER, which drove a heightened focus on pricing adequacy and coverage terms. Insurer appetite and capacity remained strong for well-performing risks. Problem underwriting areas continued to be sexual misconduct, bushfire liability, frequency-exposed business, large worker-to-worker risk and mining, especially thermal coal and tailings dams exposures. Looking ahead, market conditions are expected to remain challenging with high claims inflation expected to cause significant deterioration within long-tail portfolios. Underwriters will remain prudent and may not accommodate loss-active risks. More emphasis on market relationships and quality of submissions is expected. Starting early will remain key to securing the best results.
Cyber
Market conditions remained challenging but showed signs of emerging stability. While rate increases continued, superior results were achieved for risks with a robust approach to security conveyed via a thorough underwriting submission. Underwriting remained rigorous. Appetite expanded slightly, and capacity began to re-emerge, with a number of local and global insurers increasing average limit sizes. Coverage has stabilized overall; however, War exclusions and Aggregation-related endorsements became more common. Looking ahead, the emerging stability is expected to further ease the challenging market conditions, although recent cyber incidents may serve to dampen this impact.
Directors and Officers
Market conditions further improved through Q3 as new capacity from London and revised flexibility from local Australian insurers saw heightened competition for most industries and professions. Enhanced confidence that COVID-related impacts had diminished contributed to the market improvement. The balance of supply and demand shifted, and supply exceeded demand. Most risks saw pricing reductions, which accelerated as the quarter progressed. Underwriting became more flexible and legacy restrictive endorsements were reconsidered in some cases. Looking ahead, the softening trend is expected to continue as underwriters seek revenue growth through the end of 2022.
Property
Market conditions remained moderate; however, insurers monitored loss development following the NSW/QLD flooding event in Q1 that was estimated to generate A$6.3b of Insured losses. Insurers remained conservative in relation to Natural Catastrophe exposure and vigilant around Declared Values due to the inflationary environment. Modest rate increases continued for most risks; however, risks which experienced losses from recent flooding or with Nat Cat exposure faced more significant price increases. Capacity remained challenged for Food & Beverage, Chemical, Waste Management & Recycling and Coal risks. Underwriting turn-around times remained slow, and rigorous internal scrutiny and referral processes continued. Looking ahead, insurer competition is expected to increase for non-cat exposed, low hazard occupancies. Flood coverage will remain under pressure, with co-insurance provisions being required for risks unable to demonstrate an acceptable valuation methodology and process.
Trade Credit
Price decreases continued and insurer appetite remained healthy – risk acceptance in general returned to pre-pandemic levels. Capacity remained largely dependent on sector, with insurers still cautious in their appetite for challenging industries. While many areas of the economy continued to perform well, construction has seen margin erosion due to increases in commodity prices, labor shortages, supply chain delays and bad weather events on the East Coast, with some high-profile failures. Looking ahead, a continuation of these trends may impact insurer appetite and capacity.
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