News & Articles

Market update – Property Insurance

Insurers continue to remediate their books and underwriting focus. There continues to be a consistent reduction in capacity deployed to single insureds or assets. That said, we have started to notice some competitive rates on ‘preferred’ market risks – being those that do not present in locations with exposure to flood, cyclone or bushfire, are not constructed using non-conforming or combustible building products and/or where the assets sought to be insured do not “house” high hazard business or operational practices.

Settlement in part of the Queensland Floods Class action was approved in early May 2021, estimated to have cost the market in excess of $400m. It is estimated that the balance of the action will result in an additional loss of $500m to the market.

Property situated above the 25th parallel continues to be difficult (and expensive) to place. Alternative insurance products, such as derivative insurance, continue to act as a substitute for the more traditional material damage policies in highly exposed areas where cover is unavailable.

Properties comprising flammable building products (such as expanded polystyrene) and those with aluminium composite paneling will continue to be difficult to place. Cover will be narrower, excess structures more onerous and rates will increase. Property programmes that have poor claims history and who have not attended to suggested risk improvements will face the prospect of being uninsurable.

Looking at our own portfolio we are seeing two distinct categories of risk;

  1. Highly protected, well maintained properties which are not significantly exposed to natural catastrophes, where premiums are generally levelling out and desirability is maintaining an acceptable level of competitive tension from insurers. This is resulting in modest rate increases and retention of high levels of cover. These insureds are, for the most part, escaping the worst of the hard market.


  2. Other properties, which are either located in an area adversely exposed to perils (fire, flood), which are poorly protected (when compared to their industry peers), are tenanted with high-risk activities (food and beverage) or which are subject to previous claims experience. These accounts are generally experiencing a lack of underwriting appetite, reduction in cover, increases in excess and significant premium uplift.

In softer market cycles, policyholders who had a portfolio of predominately category 1 properties could leverage their portfolio so as to incorporate category 2 properties assets. In the current environment insurers are actively underwriting all properties and applying a higher risk rating on the overall portfolio and in some circumstances they will not consider the portfolio if it is comprised of category 2 properties.

This has seen a “breaking up” of assets formerly insured under one policy, now requiring several policies underwritten by different insurers with appetite for the particular property to be insured. Whilst this may result in a client having multiple Industrial Special Risk policies, our clients have experienced better premium and coverage outcomes.

Pre-Renewal discussions should include a review of all properties (not just the largest locations) to determine whether there will be placement challenges on a particular property and the best strategy for renewal. We also increasingly using external experts (such as insurance surveyors, valuers and business interruption specialists) to help with preparing comprehensive underwriting disclosures.

Insurers are experiencing an uplift in new business opportunities being presented to them because:

  1. insurers’ risk appetite is narrowing;


  2. insurers’ participation on individual risks is reducing;


  3. premium and excess structures are increasing


  4. coverage is narrowing

On the above basis brokers are being challenged to seek out appropriate, adequate and cost-effective insurance. As we have previously reported, insurer resourcing - already impacted for the quest to cut overhead costs and move to digitalisation – is under significant pressure. The consequence is poor response times, and in some instances, no response at all. The latter is more common where the underwriting submission is “thin” on adequate and appropriate risk particulars.