Conflicting reports on June insurance renewal rates in the large versus SME segments suggest a two-speed market is in operation, with strong competition favouring large corporate clients.

A recent report on June renewal rates by global insurance broker Marsh found “softer conditions taking hold” in the large corporate market, with rate reductions of 5%-15% in a number of areas. The report also found some discounts available to smaller operators particularly in property and some public liability lines.

That contrasts with last week’s National Insurance Brokers Association (NIBA) survey reporting “modest increases of less than 10%” in most commercial lines in the mid-to-SME market, and increases of 10%-30% in personal lines.

Marsh GM Placement Services Geoff Ferguson says the strong supply of capital to the local insurance industry is helping to drive competition for quality risks in the large corporate market.

“Returns on capital in the insurance business are pretty good compared to other investments, and the insurance market is driven by the amount of capital that is available to it at any given time,” he told insuranceNEWS.com.au.

“Currently there is excess capital in the market and underwriters are competing heavily for business.”

With the market in such good shape, Mr Ferguson says it will take more than the recent natural catastrophes to drive rates up.

“While we have seen an increase in natural catastrophe events in this current calendar year, at the moment it’s probably within market expectations. So it’s likely to take another couple of major disasters or other economic triggers to dampen the capital flows into our market.”

Marsh sees capacity and competition as key to limiting rate increases in the middle market to SME space, although some areas have seen much greater rises than others.

EBM Insurance Brokers’ MD Jeff Adams says he has seen increases of up to about 5% in commercial property, “moderate to quite large” increases in some areas of professional indemnity, and slight increases in mid-market and SME directors’ and officers’ (D&O) rates.

Workers’ compensation rates continued to decrease, along with rates for larger D&O accounts.

“Reinsurance costs haven’t gone up as we thought they would earlier this year, and the rates remain competitive,” Mr Adams told insuranceNEWS.com.au.

“It seems that the old two-paced market still applies where insurers want to increase their renewals but are happy to discount their new business.”

In contrast to NIBA’s survey results, Mr Adams says in the small domestic market he has seen “basically no change, with maybe a slight increase”, along with only slight increases in personal motor lines, but expects both markets to increase going forward.

In Cairns, Joe Vella Insurance Brokers MD Joe Vella says he is mainly seeing slight or moderate increases in the SME market, but significant price increases for farms, strata and residential cover, with the residential market rising by up to 35%.

“Insurers have become more focused on which classes of insurance are making them money,” he told insuranceNEWS.com.au. “For those which aren’t making them money, they are making the hard call to either not insure or to increase the rates.

“What has made life more difficult for people who have risks north of the 26^th parallel is that some underwriters elect not to write business up here.

“So we have real issue where we have a reduced menu of insurers, and because we are already a known weather peril environment, our rates are penalised even more.”

Mr Vella says the large corporate market is seeing “aggressive” competition between insurers, brokers and specialised underwriting agencies to attract and retain quality risks.

For businesses looking to insure their assets in Australia at present, it seems that size is indeed everything.