After several difficult years of rising premium costs and unfavourable policy conditions, the insurance market continues to show signs of improvement.

New insurers continue to enter the market and aggressively grow their presence, opening up fresh capacity for insurance buyers. London, Singapore, and other international domiciled insurers are becoming more active in the Pacific region, driving greater competition in the market. This is positively affecting premium rates, which continue to decline for most classes of insurance.

According to new figures released by global insurance broker Marsh, insurance pricing in the Pacific region (which is dominated by Australia and New Zealand) dropped by 2% in the first quarter of 2024.

The most positive results came from the financial and professional lines market, with Directors & Officers (D&O) liability seeing the largest reductions in pricing.

PROPERTY

The Property insurance segment is in the midst of a “two-paced” market cycle. Competition is strong among insurers for quality risks with favourable loss records, whilst the more challenging, less appealing risks (including organisations with severe loss records) continue to be heavily scrutinised by insurers.

Several brokers have reported pricing fluctuations of 0% - 5% for clean risk accounts with minimal natural catastrophe (NATCAT) exposures, while other, less attractive accounts (e.g. those with high-risk exposures or substantial losses) are experiencing increases ranging from 10% - 25%.

Insurers continue to impose NATCAT sub-limits (flood, cyclone, bushfire and hail) or, in some extreme cases, are withdrawing their support altogether for organisations with properties/assets in disaster-prone areas.

Insurers also continue to scrutinise the adequacy of their clients' declared property and business interruption values and often require up-to-date valuations to ensure the disclosed figures are accurate and consider ongoing inflationary pressures and rising construction costs. Without these, many organisations are being pressed to accept unfavourable ‘co-insurance/average’ provisions that can be extremely detrimental in the event of a loss causing major property damage.

Several brokers have also reported that insurers are again offering long term agreements (LTAs) to some organisations that incorporate attractive pricing models that generally offer declining premium rates over time.

CASUALTY (LIABILITY)

Conditions across the Casualty/Liability market remained relatively stable for most businesses and industry sectors in the first quarter of 2024. According to several major brokers, insurers are generally handing down nominal inflationary increases in premiums of approximately 5% - 10% for low risk or non-loss affected accounts.

Conditions were far less favourable for particularly challenging industries (e.g., Rail, Power and Utilities, Sporting Associations) and other high-risk classifications, such as organisations with major US exposures or ecclesiastical/faith-based institutions. In these cases, insurer capacity  was lacking and pricing increases were far higher, on average, at 10% to 25%.

Bushfire exposures remain a particular concern for insurers, while social inflation continues to be an evolving threat. Legislative changes and litigation funding are also weighing on insurers’ minds.

DIRECTORS & OFFICERS

Conditions in the Directors & Officers (D&O) market are particularly promising following a prolonged period of premium increases and restrictive underwriting. Premium rates have stabilised and, in many cases, reduced, although not to the lower levels seen five to six years ago.

Global insurance broker Aon released a report in mid-2023 noting that several insurers were releasing (or had already released) new or refreshed policy wordings in an attempt to retain their clients and attract new business. Additionally, brokers have highlighted reduced M&A activity, both locally and abroad, as a further reason behind the softening market.

However, while conditions are improving and cover is becoming more affordable, several new and evolving exposures present various challenges for companies purchasing D&O insurance. Insurers continue to closely monitor ESG (Environmental, Social, and Governance) policies, cash flow management, anti-money-laundering compliance, cyber risk management, and inflation and recessionary pressures.

An increasing onus on company directors to effectively demonstrate their ability to manage such issues will continue to influence insurers’ appetite and impact the cost and availability of D&O insurance going forward.

The Cyber Liability market is also steadily improving, with fresh capacity from overseas markets leading to a more competitive environment. According to Marsh, Cyber insurance rates in the Pacific region dropped on average by 2% in the first quarter of 2024.

LOOKING FORWARD

Many experts predict conditions will continue to improve throughout 2024, barring any unforeseen major events. However, whilst there are strong signs of stability, a certain level of uncertainty persists. Factors such as global economic volatility, ongoing geopolitical instability, supply chain challenges, inflationary pressures, and continuing labour shortages are some key issues that will likely influence insurers’ behaviour moving forward.

Organisations that can demonstrate strong risk management processes to insurers increase their chances of receiving better terms and pricing. However, some hard to place risks will still face certain difficulties.

This underlines the important role that your insurance broker plays in managing your organisation's insurable risks. As your spokesperson and exclusive representative in the marketplace, the interconnection between your brokers performance and the terms you receive from insurers are irrefutable. The cover you maintain, the premiums you pay, and the overall strength of your insurance strategies are directly linked to their ability to effectively ‘sell’ you to insurers.

Ultimately, the value in finding and working with the right insurance broker can be immeasurable.

As Australia’s leading insurance broker tender consultant, The Lion Partnership has developed a comprehensive tender management service that has proven to be a highly effective and uncomplicated solution for any organisation that is looking to test, challenge, benchmark and/or critically analyse their insurance programs. Find out how we can help your business.

Also read : Cyber attacks emerge as a key risk concern for Asia Pacific business leaders

 

Cyber criminals are more cunning than ever and, under the cover of COVID-19, have been targeting business supply chains and taking advantage of the acceleration of remote working.

A recent Allianz survey of the biggest threats to corporate Australia during the next 12 months puts the danger into context, with 41% of respondents nominating business interruption and digital incidents such as cyber-attacks, IT failure and ransomware incidents as the No. 1 concern. Climate change (34%) and natural catastrophes (29%) round out the top three.

Supply-chain risk management is also on the agenda for business leaders, with many cyber-attacks seeking to gain access to critical data and information.

In this potentially fraught environment, it is crucial to seek sound advice from a broker or experienced insurance consultant to get the right liability insurance in order to protect your business from financial risks relating to cyber incidents. While a wide range of cyber insurance options are available for businesses, some insurers are limiting their coverage, imposing higher deductibles and raising premiums.

Global broker Marsh reports that premiums spiked 20% to 30% in Australia in the first quarter of 2021, followed by a 60% to 80% rise in the second quarter, compared with the same periods from 2020. Many insurers are also changing the way they assess risks and are adopting stricter underwriting guidelines, with the focus being on an entity’s business-continuity and incident-response plans. 

Protecting your operations and data

In tandem with cyber insurance, businesses should be taking mitigating action to safeguard their operations, people and data, including via the following basic steps.

  1. Back up your data – it is essential to have backups of key technology platforms and data. Ransomware attackers, for example, want to seize control of your critical technology and then try to extort the business for its return. If you have off-site backup measures, it gives your business more options in the case of an attack and it will help you recover any information you lose through a cyber incident.
  2. Use multi-factor authentication – this verification security process requires employees and clients to provide two or more proofs of identity before they can access accounts and information. For instance, it could require a password and a code sent to a mobile device before access is granted. The risk-management tool should be used on everything that provides access from the internet, including virtual private networks and remote desktop access through to cloud systems such as Office 365.
  3. Install security software – such protection on your computers and devices will help prevent malware infections and other threats. You should also make a habit of patching your systems with software updates, and in response to cyber-scam alerts from entities such as the Australian Cyber Security Centre.
  4. Use passphrases instead of passwords – simple passwords represent one of the biggest weaknesses in most businesses’ cyber wall. Passphrases can consist of a phrase, or a collection of different words. They should be simple for humans to remember, but difficult for machines to crack.

Businesses that implement such basic cybersecurity measures are likely to be looked upon more favourably by cyber insurers, potentially leading to cheaper premiums and more comprehensive cover.

Make your insurance fit for purpose

At its core, cyber liability insurance can help your business cover the costs of recovering from a cyber-attack. As with any insurance product, it is important for your business to have clarity around what the insurance actually covers, and it does not cover.

Standard coverage should include costs related to elements such as:

Each business may have different cyber-insurance needs, so the role of your insurance broker is critical, along with the possible assistance of external insurance specialists who can help advise on the best possible cover. Their capabilities and expertise could mean the difference between your business surviving a cyber-attack, or being put out of operation.

Seek specialist advice

Given such high stakes, it is wise to conduct an audit of existing insurance policies to ensure they will be suitable and effective in the event of incidents such as ransomware attacks.

While cyber insurance is important, getting just any generic insurance cover is not the answer, especially at a time when cyber threats are becoming more common and sophisticated. Poorly structured insurance can often be a waste of money and fail to prevent a business from experiencing significant distress.

The message is clear – work closely with your insurance broker and other specialists to ensure that your cyber risks are clearly understood, and that you have insurance cover when you need it most.

Determining the most appropriate form of cyber insurance for different businesses can be difficult speak to one of our experienced insurance experts to discuss the complex exercise of getting the right cyber cover.

Also read - Your important complete cyber liability market update.

 

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