Honan releases quarterly insurance market report
“Insurers justify that general claims costs have increased, and leisure travel trips will be charged at a higher rate accordingly,” Foxton said. “Insurer appetite remains low for less attractive risks, such as high-fire load and catastrophe-exposed areas where premiums have increased by up to 25%.”
Inflation is also driving reinsurance costs, with insurable flood losses in Australia taking a hit of $4.8 billion due to the flooding in New South Wales and Queensland, deemed Australia’s third-costliest natural disaster, which occurred in February and March 2022. Moreover, the cost of managing insurance claims has increased due to the rising price of materials through supply shortages and shipping delays. These factors may cause property rates to increase as insurers seek to gain profits back.
Strata and real estate
Kieran Drum, national head of strata at Honan, saw price increases in the sector, with strata insurance premium increases sitting at around 15% over the past year. Meanwhile, landlord insurance within the real estate sector has settled after some turbulence in 2020 and 2021.
Drum predicts that strata insurance will continue to increase in 2023 to balance insurers’ losses in 2022. He also expects reinsurance costs to rise for the strata and real estate sectors, set to be reflected in rising premiums. Focusing on the impacts of the devastating flood in Queensland and New South Wales (NSW) in February and March 2022, Drum expects flood-prone areas to struggle with insurance affordability next year.
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Financial lines
Ben Robinson, placement manager – professional & executive risks at Honan, found that directors and officers (D&Os) are now experiencing “as expiry” or discontinued renewal terms as the London market pushes for new business. He also saw greater insurer appetite in sectors that may have previously been viewed unfavourably, including – but not limited to – fintech, biopharma, dual-listed accounts, construction, private equity, medical cannabis, IPOs, and crypto or digital assets.
He also warned that the insurance industry is facing the most threatening cyber environment to date. As a result, boards have prioritised cyber resilience. Meanwhile, the general professional indemnity (PI) insurance market remains challenging for most industries, with the exit of several insurers in this class over the last few years and a major international capacity holder existing in the past six months.
Employee benefits
Alexandra Slimming, head of global benefits at Honan, noted relatively low rate increases for private health insurance (PHI) in Australia as part of the rate review on April 1, 2022, currently between 2% and 3%. The four-day working debate has also gained attention globally, with various organisations piloting this format in the UK and Europe. It has also caught the eye of the insurance industry in the US, Ireland, Canada, Australia, and New Zealand.
Workers’ compensation
Sharon Rutherford, head of risk consulting at Honan, said the rise in claims deteriorated the performance of workers’ compensation schemes across Australian states and territories. Therefore, she advised regulators to consider substantial reforms to address these increasing costs. “In VIC, SA, and WA, legislative changes are being considered part of this reform,” Rutherford continued.
Honan’s previous insurance market forecasts for Q3 2022, released on April 28, focused on four sectors.
