July 2023 Market Update – Commercial General Liability

Rate consistency and breadth of coverage is returning across casualty products. Most programmes experienced rate increases and reduction in coverage during the “hard market cycle” as insurers remediated claims-affected portfolios. Whilst some policyholders experienced rate increases during this period, we are now seeing consistency return.

Capacity and subsequently competition have improved since last year. Australian insurers have broader appetite, yet there is still coverage that they cannot provide. Lloyd’s of London has a much broader appetite and can offer ‘manuscript’ coverage to suit risk exposure. Rating wise, Lloyd’s of London is not perhaps as competitive as Australia, but that changes on larger programmes (typically in excess of $50,000 premium).

We currently recommend clients budget for rate increases of 10 per cent for casualty renewals. The key factor driving steady rate increases is inflationary pressure on claim costs, which have increased by 15 – 20 per cent over the past 24 months.

Inflation has significantly impacted litigation and material costs, as well as extending the timeframe of claims on average. Insurers need to pass these costs on to policyholders to maintain profitability and we are seeing this across all policy lines. See our recent article on Social Inflation for further commentary on this topic.

Distressed accounts will continue to navigate a hard market to obtain appropriate cover and rate increases may be exponentially higher than 10 per cent. It is still common to see:

  1. Increases to deductibles for labour hire and mining businesses.

  2. Increases to deductibles for claims brought by injured, non-employee workers (ie: Worker to Worker Claims).

  3. Aggregate deductibles for accounts with high claims frequency.

  4. Broader exclusions applied for liabilities assumed under contract, cyber breaches, and infectious diseases.

  5. Coverage being offered in some instances, on a “claims made basis”, for:

a)  Injuries arising from concussion and participation in sporting activities or events.

b)  Psychological and bullying claims.

c)  Sexual abuse (or otherwise it is excluded in its entirety).

In an environment of relative market stability, it is important for policyholders to work on “demonstratable risk maturity”. Where this can be presented to insurers on renewal there will be benefits to the policyholder.

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