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June renewals: rising at last

The soft market may finally be behind us, as brokers report underwriters successfully pushing through rate increases in the June renewals.

Most brokers contacted by insuranceNEWS.com.au have reported rises across all sectors and classes.

Arthur J Gallagher says the transition from a soft market began early this year and premiums are now hardening “across multiple classes”.

“Insurers are looking to restore profitability on lines that have been affected by high loss ratios,” MD Broking Sarah Lyons told insuranceNEWS.com.au.

“It’s a mixed story, however, reflecting variations in capacity and price-driven competition in some spaces.

“Other insurance classes have seen loss ratio reductions, which may translate into premium-related benefits at renewal.”

Ms Lyons says the directors and officers’ insurance market is experiencing “significant correction”. “Scrutiny on the insured’s risk exposures for many clients may lead to reduced limits and increased premiums.”

“Although much of the correction is being witnessed at the corporate end of the spectrum, risks from large-end to small business are all experiencing tightening conditions as insurers strive to return their portfolios to a reasonable or acceptable investment return.”

In property, major insurers are seeking rate increases of about 5-7.5%, while professional indemnity rates are expected to be flat, driven by a loss ratio reduction and a more favourable claims environment.

Public and product liability capacity “remains readily available”, with insurers applying minimum rate increases to risks without losses.

Ms Lyons says business pack policies are seeing a minimum 5% increase, up to 8% in some cases.

And in management liability, increases are anywhere between 10% and 25% due to high loss ratios and increased pressure on margins for insurers.

Perth-based Leed Risk Services MD Con Manetas told insuranceNEWS.com.au small rate increases, tougher underwriting criteria and restrictions on policy wordings are all in evidence in this renewal season.

“Those things together are usually a sure sign the market has bottomed out,” he says.

Mr Manetas says this time last year underwriters tried to push through some increases, but there was resistance.

“Clients are more open to it this year. There is more acceptance of small rate increases.”

He says in the SME sector rates are up 0-5%, and in the middle corporate space rises are 0-10%, but clients that shop around could get a better deal.

“You can still be surprised,” Mr Manetas says. “For new business, rates tend to be a bit better than for renewals.”

Similar increases can be expected over the next year to 18 months, he says, unless new players enter the market or there is a very benign claims environment.

Insurance House, which is based in Melbourne but has offices in Sydney and rural Victoria and NSW, says the picture is “very spotty”.

Executive Chairman Gary Gribbin says personal lines are seeing increases of 3-6% and SME 3-5%, but the middle corporate market remains soft.

“Insurers are being more selective and tightening their underwriting criteria,” he told insuranceNEWS.com.au.

“It has definitely firmed up a little, and the market has bottomed out in personal and SME.

“But there is still significant softness in the corporate sector. The industry is still awash with capital and it has to be put to use.”

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