Insurance buyers are generally facing a positive outlook for the second half of the year following a moderation of rate increases in most classes during the first half, Marsh says in a Mid-Year Market Update for Australia. 

“Across most insurance classes pricing appears to be stabilising as insurers achieve premium rate adequacy,” Marsh Asia Pacific Head of Global Placement John Donnelly says. 

“Coupled with improving loss ratios and higher investment returns from increasing interest rates, this has encouraged a return of market competition, albeit cautiously.” 

Australian market rate changes in the first half included property rising 0-15%, liability gaining 5-15%, directors’ and officers’ (D&O) falling 10-25%, professional indemnity rising 0-10%, cyber rising 10-15% and both construction and accident and health increasing 5-10%, the report shows. 

In property, challenging market conditions have led to wording amendments and more restrictive cover in recent years and the trend has continued, with insurers scrutinising limits and seeking to impose annual aggregates around natural catastrophes coverage. 

“Specifically, we are seeing storm limits and deductibles being applied and/or flood definitions being expanded to include both pluvial and fluvial flood events,” the report says. 

Marsh says that as profitability and competition begin to return in property, it’s expected that the remainder of the year will see further easing of pricing gains, and more consistency in coverage terms, with local and overseas insurers likely to continue to increase capacity as they focus on growth strategies. 

Challenging market conditions continued well into the first half for the casualty/liability market. 

“The long-tail nature of liability risks combined with an uptick in claims latency, frequency and severity and increasing claims inflation over prior years, continued to drive market uncertainty,” Marsh says. “As a result, policy retentions and premium rates continued to be scrutinised by insurers.” 

Environmental, social and governance considerations remain a key element of the underwriting process, with insureds asked to show a clear strategy. 

The report also highlights that, similar to covid and cyber cover in recent years, per and polyfluoroalkyl substances (PFAS) are coming under increased scrutiny. 

“In recent months, we have seen insurers attempting to apply exclusionary language in policy wordings to limit coverage provided for PFAS risks,” it says. 

Looking ahead Marsh expects casualty insurers will likely continue to seek premium rate increased across portfolios, but new capacity and appetite for growth is also expected to continue generate competition in the liability market. 

Competition has remained strong in the D&O market and is expected to continue into the second half, while professional indemnity (PI) premiums in general moderated, with some exceptions. 

“Industries or professions that have a higher PI risk exposure such as design and construct, engineering, financial planning and certain financial institutions continue to be scrutinised at renewal and experienced challenging market conditions throughout 2023,” it says. 

Corporate travel premiums continued to rise and Marsh notes that deficiencies in travel knowledge and pre-planning are often overlooked. 

“There has been an increase in the frequency of preventable travel incidents, such as pickpocketing/theft, scams and animal bites,” it says. 

It’s important for employers to prepare their employees with country specific information ahead of planned travel, while employees should also be responsible for familiarising themselves with the risks, as well as company risk management strategies, the report says. 

The report is available here.