The increased insurance capacity and competition that was a feature of the global market last year is showing no signs of easing, according to Aon Australia’s first-quarter report.

There is a flat-to-lower trend in premiums for Australian lines such as property, general indemnity and directors’ and officers’ insurance, with exceptions for less-attractive risk areas.

In property, Aon says rates have come under pressure following a “massive drop-off” in worldwide natural catastrophes following the spate in 2010-12.

A rise in capacity fuelled “unprecedented” competition in the global property market last year.

“It is fair to say that as we move through the first half of 2014, we can continue to expect more of the same,” Aon says. “The resulting good news for businesses is that premiums have tumbled over the past six months and continue to fall.”

The market has also faced pressure from businesses taking on more risk and opting for lower premiums and reduced cover, as the uncertain economic environment encourages cost-cutting drives.

Ex-Tropical Cyclone Oswald was the only major disaster to affect Australia last year amid a benign global environment, Aon notes.

The Insurance Council of Australia (ICA) says flood and storm damage caused by Oswald in NSW and Queensland topped $1 billion.

So far this year ICA has declared catastrophes for Perth bushfires, which have cost $15 million, and Cyclone Ita, which crossed the Queensland coast earlier this month.

Aon GRIP data – which covers clients ranging from micro SMEs to multinationals on the Australian Securities Exchange – shows property premiums at renewal grew 1.05% in October-March compared with gains of 4.25% in the previous corresponding period.

In general liability, rates have hardened for bushfire and offshore energy exposures, while intense competition and surplus capacity in other areas is keeping premiums flat to lower.

“Capital investors are seeking the Australian insurance environment as a safe haven for their investments and are entering the market in large numbers,” Aon says. “This has extended the soft market conditions and these circumstances won’t change until the capital flow is tempered.”

Such competition means no one wants to be the first to increase rates, and these conditions are forecast to remain much the same over the next six months to a year.

In professional indemnity, competition has heated up in the SME sector, while more broadly market conditions remain characterised by rate reductions and improved wordings.

“While most business classes have the pick of the market, problem classes, such as financial planners, continue to struggle to find suitable well-priced insurance,” Aon says.

Issues in the directors’ and officers’ sector include potential fallout from the Bridgecorp case in New Zealand, new privacy legislation that took effect on March 12 and rising levels of compensation in class actions.

Still, Aon says additional availability of traditional and non-traditional capital continues to drive down premiums.

“It is without doubt a buyer’s market and will continue to be for the foreseeable future. Even for those higher-risk businesses that are less attractive to insurers, the insurers’ view is tending to soften.”

The financial lines market is expected to remain flat over the next year amid a relatively static claims environment.

In New Zealand, the influence of the Canterbury earthquakes hangs over insurance markets, but Aon says more competition is emerging.

Capacity is readily available and pricing is softening in the corporate property market, with renewed interest emerging from local and overseas insurers in the second half of last year. But cover remains difficult for riskier earthquake-prone buildings.

Earthquakes in the north of the South Island late last year had little market impact, Aon says.

Australian and New Zealand reinsurance rates are also tipped to decline at the major July 1 renewals, following the recent weaker trend.

“It is our expectation that reinsurance rates will continue to ease on a risk-adjusted basis given the significant appetite and interest for our market against a backdrop of strong local balance sheets and relatively static demand levels,” Aon says.