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Berkshire Hathaway Specialty Insurance
Berkshire Hathaway Specialty Insurance

New Zealand caught up in PI fallout

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Insurers in New Zealand are imposing tougher conditions for professional indemnity (PI) covers in response to the ongoing crisis in Australia and globally, Willis Towers Watson says today in a market update.

London-based Landmark Underwriting, the last provider of exclusion-free PI policies in Australia, pulled out of the market this month to limit its exposure to the problem-plagued building industry.

“There has been a significant shift in the PI market globally, and insurers in New Zealand are starting to follow suit,” Willis Towers Watson Auckland-based National Manager Construction Tony Seto said.

“Aluminium composite panels continue to be an issue for insurers as they impose exclusions and conditions to address the increasing level of claims experienced overseas.

“The market capacity available for project-specific PI placements has reduced significantly. This makes achieving the contractually required limits increasingly challenging.”

He says additional insurers are required to obtain adequate cover, and this results in an increase in pricing.

Areas of cover receiving greater scrutiny include non-conforming building products, loss mitigation, rectification costs and express fitness for purpose.

Claims-affected accounts can expect “a lot greater increases” in premiums, he says, while clients with favorable track record are in line for moderate rises.

The market update says a significant player in the PI market is planning to axe this line of cover, without naming the company.

Allianz Global Corporate & Specialty announced earlier this month that it will cease underwriting PI and other long-tail risks in Australia and New Zealand from September.

The directors’ and officers’ (D&O) market is also feeling the effects of the hardening conditions in Australia, with growing class actions triggering sharp rate increases.

Willis Towers Watson says companies with dual listings in New Zealand and Australia are facing more stringent requirements from insurers and underwriters.

“We are forecasting that premium rates will continue to increase, and more dramatically so where clients have a dual listing in Australia or require Side C cover,” the company’s National Manager Financial & Executive Risks Nigel Grantham said.

Side C cover typically insures listed companies against liabilities arising out of securities market conduct breaches.

“Insurers will reduce capacity and we envisage more co-insurance among insurers to fill clients’ required capacity,” Mr Grantham said.

Click here for the report.