Market update – Property insurance

Globally, natural catastrophes were significant in 2019. Hurricane Dorian and Imelda in the Bahamas and USA, Typhoon Hagibis and Faxai in Japan, severe flooding in the USA and Asia.

In Australia, bushfires, floods and hailstorms have seen Insured losses exceed $100bn in the period 1 July 2019 to 30 June 2020. Insurers will have continued focus to mitigate against further catastrophic property loss over the coming 12 months.

A summary of losses is below:

2020 - 2021 Disaster seasons

Insurers have already sought significant premium uplifts on renewals between March and June 2020. We expect this will continue particularly where increases were not experienced by policyholders at the time of their last renewal.

It is expected all insurers will review and amend their policy documents to specifically exclude any cover for COVID-19 or contagious diseases.

It is likely that some insurers will reduce exposure to individual losses and look at their accumulation of risk by geography. This will impact on capacity as actuaries seek to reduce exposure, multiple insurers will be required to participate on single risks..

Property situated above the 25th parallel is becoming much harder (and expensive) to place. Alternative insurance products, such as derivative insurance, will likely act as a substitute for the more traditional material damage policies in highly exposed areas.

Properties comprising flammable building and those with aluminium composite panelling 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 a similar fate, and perhaps even become “uninsurable”.

The sheer number of accounts being presented to the market is also increasing as brokers seek to negotiate the best terms for their clients. Many property underwriters are being overwhelmed with submissions, particularly at the end of each quarter. Incomplete or poorly prepared quotation requests are being declined by insurers, as are accounts with a history of being “marketed”.