January 2023 Market Update – Commercial General Liability

2022 has seen some stability return to the Australian Casualty market. Pricing fluctuation minimised to a steady +5-10 per cent. Capacity and coverage conditions have remained steady, save for continued tightening around worker-to-worker and contractual liability extensions (see our construction liability update for further particulars). Many insurers, are heading into their reinsurance treaty renewals. We expect outcomes will see the current conditions maintained.

In our July market update we advised that policyholders could expect average annual rate increases in the range of 5 to 10 per cent. For higher-risk business activities and claims-affected accounts, rate increases can be exponentially higher, and for these accounts, additional work is required to present thorough submissions to underwriters which demonstrate efforts are being made by the policyholder to address holistic risk management.

As regards coverage trends, the following matters remain an issue:

Cyber exclusion: Due to the distressed cyber market, we have experience broad cyber exclusions across the casualty portfolio. However, while the majority of insurers have introduced a standard exclusion it is important for each broker to review these clauses to ensure no further broadening such as the word “Indirect” is introduced.

Infectious Diseases / Covid 19 exclusion: Similar to Cyber, insurers are well aware of pandemic related implications. Most insurers continue to provide a standard exclusion however we have experienced in recent months, insurers curtailing the broader infectious disease exclusion to the specific “covid-19” exclusion.

Contractual Liability extension: A rise in a number of onerous contractual liability conditions has seen insurer issuing coverage broader than what is anticipated. As such, insurers continue to emphasise a Client’s contractual obligations to ensure push back of indemnity and liability are provided. See our recent articles on contractual obligations here.

Key issues for casualty renewals include:

Thorough presentations/submission. The greater the detail, the better the outcome.

Use of third-party experts: Demonstrates to insurers that the business methodology is continuous and proactive risk management and improvement measures are in place. It also discharges Directors duties. Further information on our approach in this regard can be found here.

Strategy meetings: working with client to strategise the best options moving forward and review all available avenues, including non traditional insurance.

Timing: we have experienced long delays with insurers, therefore a 2-3month lead time is critical to ensure submissions, face to face discussion and further information can be procured and reviewed.