January 2024 Market Update – Property

Over the last six months, we have experienced the insurance market continue with a two-pronged approach to underwriting philosophy. Programmes with effective risk management procedures, updated property valuations and clear remediation plans (to offset or respond to claims) are experiencing more options on renewal. Overall a 5 to 15 per cent uplift in premium is standard with broadening of coverage terms and conditions available.

Risks that are exposed to challenging occupancies, significant claims and natural catastrophes are subject to increased scrutiny due to limitations in insurer appetite, reduced capacity, higher excesses, coverage restrictions or more onerous conditions.

Though capacity remains strong, insurers are also having to re-evaluate their capacity approach, with the demise of Catholic Church Insurance (CCI) playing a major role in constraints across religious and educational institutions who had insured via them. The pressure to replace CCI’s capacity has inundated the general property insurance market with insurers starting to now experience the flow on effects of such a significant property portfolio.

Adding to this, insurers are bracing for the expected El Niño season with inevitable impacts to property programmes over the next few months. We have experienced considerable rainfall which has led to vegetation growth which insurers argue leads to an increased bushfire exposure for the future. Policyholders must demonstrate their mitigation framework to reduce deductibles, increase aggregate limits or even secure capacity.

Lastly, in March 2022 New South Wales and South East Queensland experienced the worst flood event in our nation’s history. Over the last 12 months, we have seen through various social media outlets the various issues and concerns policy holders have faced. The Insurance Council of Australia (ICA) appointed Deloitte to conduct an independent report on the learnings of the industry’s response, timeframes, resources, claims handling and complaints. In October 2023, Deloitte issued their report recommending new benchmarks for catastrophe preparedness in Australia, which is now being reviewed by ICA.

It remains imperative for policyholders to work closely with an appropriate risk advisor. Not merely for the negotiation and placement of the insurance programme, but to understand exposures and risks relevant specifically to them.

We suggest all clients focus on the following aspects of their property programme:

  • Ensure Insurance Valuations are part of the property maintenance and risk management portfolio.

  • With supply chain concerns still critical for any business, reviewing contingent business interruption coverage, indemnity periods, limits and adequacy of alternative suppliers and customers is crucial for any part of the Business Interruption review process.

  • At Bellrock, we believe it is fundamentally prudent for any client to seek external third-party experts in these areas – see our article here.

  • Work closely with your insurance advisor to implement or update risk management framework including the mitigation plans around natural catastrophe exposures. Demonstrating proactiveness will lead to fruitful discussions with insurers and provide underwriters with comfort over these risks.

  • Consider and explore alternative non-traditional insurance risk transfer methods to complement or offset your insurance program. These can include Parametric insurance or Captives.

As always, for the next 6 months, all insurers will be focused on insurance advisors issuing comprehensive insurance risk submissions.  Adequate lead times will be imperative to procure competitive terms and bespoke insurance programmes for clients to consider and adjust according to their needs.

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