July 2022 Market Update – Overview

2021 was another difficult year for insurers and unfortunately 2022 has continued the trend with local and global conditions presenting significant challenges to the insurance market.

Key factors impacting the market include:
  • Natural disasters and catastrophic weather events

  • Relentless cyber attacks

  • Political unrest including changes in government

  • Profitability of insurers

  • Claims inflation

  • Environmental, Social and Governance

  • COVID-19

There have been increases in premiums across all lines of business in the insurance market with Commercial Property, Professional Indemnity and Cyber continuing to lead the way.

Commercial Property and Financial Lines markets are undertaking rate correction in the wake of increased and new forms of claims activity.  Property underwriters are now regularly referencing the term “Rain Bomb”, which didn’t exist until February this year, and the Cyber market is scrambling to keep up with increasingly sophisticated online scams that are causing extensive insurer losses.  In contrast, the Casualty market hasn’t experienced the same influx of claims and “buzz issues” have remained much the same for the past 24 months.

As outlined in our policy class breakdowns, new capacity has entered the Australian market for some lines that had previously relied heavily on London capacity, however, underwriting discipline and scrutiny of risks continues with limits of liability decreasing. This is leading to more insurer participation on co-insurance placements. The previous trend of increasing deductibles has stabilised with insurers leaning towards premium increases and coverage restrictions. Overall, underwriter response times remain slow.

We had been hopeful that 30 June 2022 would be when the “insurance clock strikes 12”, meaning that the hard market conditions may start to ease for the majority of industries:

Insurance Cycle Graphic

However, the events so far of 2022 have set this back at least 6 months, the risk and insurance market remains challenging and premium relief is unlikely to be forthcoming, demand continues to outstrip supply for capacity and this will continue to be the case for the remainder of 2022.

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