Rates are rising and the industry is preparing for a hardening market – something that will be a new experience for many younger employees.

JLT Australia is working to prepare clients and staff for the changed landscape, CEO Leo Demer says. For the first time, it has published on its website tips for clients to improve their renewal process and it is encouraging them to start early.

Now staff are being trained in what to expect from a hardening market and how to convince underwriters who are reluctant to take business.

Mr Demer says any broker aged under 35 hasn’t seen a hard market before, and “some guys cannot believe it when an underwriter says no”.

He told insuranceNEWS.com.au underwriters are now looking more closely at each risk, and brokers may have a harder job to convince them to take on a risk. In this situation, relationships with clients will be important, because they and their broker will have to develop strategies to obtain appropriate cover.

Suncorp Commercial Insurance CEO Anthony Day doesn’t believe the market will see the massive price spikes of previous cycles, but he does see insurers being more selective about risk.

“Our appetite has not changed, but it is about pricing risk appropriately,” he told insuranceNEWS.com.au.

Suncorp has invested heavily in software to assess and price commercial risk, which Mr Day says will enable it to attract better risk and increase the profitability of its commercial business.

He says the insurance market remains competitive. There is still plenty of capacity in the global reinsurance market, and while pricing is expected to rise the market still has an appetite for Australian risks going into the June renewals period.

Hannover Re says the Australian and New Zealand markets must prepare for higher rates following a summer of disasters.

Senior Underwriter and German-based Head of P&C Treaty Department for Australasia, Michael Harms, says there will certainly be significant price increases in the coming year as treaties are renewed.

He told insuranceNEWS.com.au the ability of the New Zealand market to fund its earthquake risk is “undergoing severe stress”, as the market is largely dependent on reinsurance.

Although Australian cat losses have been less severe from a return period perspective, Australian clients should also be prepared to shoulder a pricing reaction when renegotiating reinsurance since many of the Australian ceding companies were affected by the New Zealand quake via their local operations.

“For loss-affected covers in Australia you will possibly see cat XL (excess of loss) price increases of between 50-100%, perhaps more,” says Mr Harms.

He says the Hannover Re board continues to support the Australasian market with similar or slightly expanded capacities, “but we will not become bullish because we know that it will depend on pulling out all stops as underwriters to reassess the risk and to consequently adjust pricing and capital consumption, and we will utilise our available aggregates cautiously and prudently and only at the right price”.

Hannover has already implemented loadings and surcharges on new business and renewals, after revising its internal models to correct for uncertainties.

Mr Harms says parent companies which have had to inject capital into their Australian branch operations after the spate of events here “will definitely ask for pricing increases in order to fund the reinstatement of impaired capital levels”.

And he offered some advice for local insurers which may be tempted to use the environment of a hardening market to compete for more business.

“At this point, underwriters should not be tempted to talk prices down in an effort to buy market share.”