A focus on professional indemnity and directors’ and officers’ (PIDO) liability exposures is crucial in the uncertain financial climate, according to Berkley Re Australia CEO Peter Nickerson.

He told the Australian Professional Indemnity Group conference last week that reinsurers do not generate the kind of systemic risks that arise in banks, and the insurance industry is “stable, strong, well-capitalised and able to meet obligations without government assistance”.

He says PIDO products are heavily reinsured and would be “greatly diminished” without reinsurance support.

The PIDO market in Australia and New Zealand is soft, with ample capacity, but that does not mean the potential for big claims should be ignored in the unstable global financial climate.

Mr Nickerson says 2012/13 will see insurers receive inadequate returns for PIDO classes, with a push to reduce primary and reinsurance casualty prices to offset property increases.

“Prices are on the bottom end,” he said. “If the losses don’t happen, that’s fine. But the potential for loss is substantial and the prices aren’t quite adequate enough to cope with the probable losses that can occur.”

Mr Nickerson says the practice of “fracking” – creating fractures in rock formations to facilitate the flow of oil and gas – has led to earthquakes and may cause more, creating the potential for major PI and D&O exposures.

“There is a lot of controversy around fracking,” he told insuranceNEWS.com.au. “The potential is there for environmental impairment and pollution and D&O claims against the management of companies and professional indemnity against engineers.”

He says PIDO rates must keep pace with exposures and that rate reductions are inappropriate.

“Don’t be consumed by property catastrophes; always be mindful of the significant casualty/PIDO exposures that exist,” he said.