Insurers are scrutinising limits, seeking to impose annual aggregates and expanding flood definitions to include fluvial and pluvial inundations in response to the increasing claims from wild weather events, Marsh says in its Australian market update. 

Marsh Placement Leader, Corporate & Commercial – Australia Scott Eccleston says several insurers have moved to extend flood definitions following weather disasters that have seen properties inundated by rainfall run-off rather than river flooding. 

“Brokers need to give their clients advice and try and make sure we can keep as broad a coverage as we can, and ensure clients are aware if there is a change,” he tells insuranceNEWS.com.au. “Every insured has to have a look at the way it’s worded.” 

The insurance industry flood definition introduced in 2012 for home and contents, small business and domestic strata properties defines flooding as water that escapes from rivers, dams, canals or other natural watercourses.  

Pluvial flooding, which is separate to overflowing rivers and dams, occurs after extreme rainfall and includes flash flooding and surface water run-off. 

Mr Eccleston says insurers are also focusing on sub-limits and aggregate restrictions for floods, where cover may be capped for one or several events. Aggregate limits may also apply for businesses that have numerous premises across the country, such as national retail chains. 

More regular and severe natural catastrophes are likely to keep the focus on tighter restrictions, with events in the US typically having flow-on impacts for the international market, while risks are being more closely assessed. 

“There’s potentially more tightening of terms,” Mr Eccleston says. “Insurers and our clients are getting more sophisticated with the data so the loss modelling is helping insureds and insurers make better, informed decisions.” 

In Australia, insureds with good claims experience and low natural catastrophe exposures saw premium increases of 0-8% in the first quarter, while for loss-impacted insureds or those with high natural catastrophe, US or New Zealand exposures, increases of 10-15% were experienced, Marsh says. 

The second quarter saw a lower average pricing increase of 5% across the Pacific region, driven by a combination of historically high-priced capacity being replaced and a wider range of 0-5% increases across the market in general. Overseas placements of Australian risks into London and other European markets experienced rate increases of 5-10%. 

Mr Eccleston says the Australian market generally is improving, there’s some new entrants, incumbents are taking more of a growth approach and insurer investment returns are rising. But at the same time, underwriting remains cautious.