2022 Market Update – Property

The property insurance market has again been stretched and tested with the continual impacts of COVID-19 and ‘Insurance Catastrophe’ events resulting from natural disasters. In the past year, we have seen the Perth Hill Bushfires, followed by floods impacting significant parts of New South Wales and South East Queensland.

Globally, the devastation of Hurricane Ida is still being realized with Catastrophe Risk Modeler RMS predicting a total loss between US$31-44 Billion. In addition to this, flooding in Central and Western Europe, has seen further losses for the insurance industry estimated at US$7.7 billion.

Insurers are more particular in the business they will write, with capacity limitations and increases in deductibles and pricing observed broadly across the property sector.

In Australia, La Nina anticipates considerable weather events, particularly flooding. Insurers have been prudent in their underwriting approach, focusing on clients with sound risk management procedures, including continuous maintenance protocols and monitoring. Coupled with this, for larger Australian insurers, we are heading into reinsurance treaty negotiations.

Summarily the key issues for the property market include:

Reduced capacity, particularly for assets above the 25th Parallel and assets located within exposed bushfire regions.

Infectious disease exclusions.

Higher deductibles and reduction in limits.

Non-damage business interruption limitation (limit reduction or exclusion) in relation to public utilities, prevention of access and closures of public authority.

Cyber and electronic data exclusions.

Despite these factors, pricing appears to be stabilizing with international markets such as the Asian market via Singapore creating good competition for local insurers who are conservative in their risk selection.

As the market continues to be precarious, insurers are responding with highly selective risk appetites for certain perils. Clients are seeking alternative solutions such as funding their own insurance via their own balance sheet or Parametric Insurance. Though this remains an emerging solution, demand is increasing.

Furthermore, it is imperative for clients to have their broker articulate their unique selling position from pricing to education and quality of information. At Bellrock, it is our primary focus to ensure our clients are receiving the best possible pricing and broadest cover by obtaining detailed and accurate information relating to their risk exposures. Quality information is critical when submitting a robust underwriting submission. Coupled with this, we believe it is vital for insurers to hear from our clients directly, especially around risk management and their proactive approach in mitigating risks, quality loss control measures and business continuity plans.

With insurers maintaining a conservative approach, open communication between stakeholders, including educating clients on their role in the insurance process, is crucial to the success of negotiations. Early engagement for renewal and constant communication of insurance solutions and markets is key to a successful placement and partnership.