The hardening insurance market is unlikely to peak until late next year as underwriters continue to focus on improving profitability, Honan Insurance Group says.

Last year marked the third full 12-month cycle of underwriting remediation for local insurers, and there are no real signs of that altering.

“Hard market cycles tend to exist for up to five cycles before material and consistent shifts are witnessed, and with history as an indicator we anticipate the peak to occur towards the end of 2021,” Head of Broking and Carrier Management Travis Wendt said.

A focus on pricing adequacy, restrictions on certain aspects of coverage and increased excesses are forecast to remain features of the market this year.

Honan’s Quarterly Market Update says underwriters are “currently being very selective on both renewal and new business, and walking away from risks that don’t stack up”.

“We have witnessed a number of instances where the incumbent insurer has elected not to renew cover due to changes to underwriting guidelines, even in long-standing client/insurer relationships,” Mr Wendt said.

The report says the tougher stance by local insurers has led to greater reliance on alternative markets such as London and Singapore. But overseas providers, especially Lloyd’s, are in the midst of their own remedial action after several years of significant losses.

High hazard property, professional indemnity, natural catastrophe risks and residential strata risks with aluminium composite panel construction will remain a challenge as capacity continues to diminish.

“Prior to the arrival of summer and the current devastating bushfire disaster across multiple states, insurers had placed embargoes on new business within regional areas of NSW,” Mr Wendt said.

“There’s no doubt that as a result of the bushfires there will be a further drag on premiums and cover.”

He says the ongoing impact of cyclones and tropical storms in north Queensland will also contribute to the market taking corrective action to limit its claims exposure.