Hard market is here: Marsh
Insurance broker Marsh has declared the soft insurance market in Australia is over.
In its latest insurance market review, Marsh warns that the surplus of available risk capital that has kept insurance premiums down in recent years has deteriorated.
The report says the global financial crisis has taken a toll on international insurers, with the top 10 losing 25% of their value in the last quarter of 2008.
Australian insurers have felt less of an impact, but Marsh GM Placement Services Scott Leney says recent events have forced the onset of the hardening market.
He told insuranceNEWS.com.au that last year Marsh was seeing losses increasing, interest rates coming down, insurers returning to technical underwriting and catastrophe losses. Then the financial crisis reared its ugly head.
“Now insurers can no longer rely on their investment returns and the interest earned on premiums to make a profit because those returns have eroded considerably,” he said.
While there is still plenty of capital in the industry at present, Mr Leney says it won’t be long before it becomes unsustainable for insurers and they start increasing premiums.
Short of a major global insurance event, he expects premiums will rise in the vicinity of 5-10%, and perhaps slightly higher in the D&O sector.
“Insurers are now bracing themselves for a surge in D&O liability and errors and omissions claims,” he said. “Coupled with some significant catastrophe losses, which increased by about 50% in 2008, insurers will be focusing on underwriting profits in a tough investment and growth climate.”
In its latest insurance market review, Marsh warns that the surplus of available risk capital that has kept insurance premiums down in recent years has deteriorated.
The report says the global financial crisis has taken a toll on international insurers, with the top 10 losing 25% of their value in the last quarter of 2008.
Australian insurers have felt less of an impact, but Marsh GM Placement Services Scott Leney says recent events have forced the onset of the hardening market.
He told insuranceNEWS.com.au that last year Marsh was seeing losses increasing, interest rates coming down, insurers returning to technical underwriting and catastrophe losses. Then the financial crisis reared its ugly head.
“Now insurers can no longer rely on their investment returns and the interest earned on premiums to make a profit because those returns have eroded considerably,” he said.
While there is still plenty of capital in the industry at present, Mr Leney says it won’t be long before it becomes unsustainable for insurers and they start increasing premiums.
Short of a major global insurance event, he expects premiums will rise in the vicinity of 5-10%, and perhaps slightly higher in the D&O sector.
“Insurers are now bracing themselves for a surge in D&O liability and errors and omissions claims,” he said. “Coupled with some significant catastrophe losses, which increased by about 50% in 2008, insurers will be focusing on underwriting profits in a tough investment and growth climate.”