The commercial insurance market remains soft for now, but insurers’ behaviour in recent renewals is not typical of previous soft markets, according to major broker Marsh.

Executive Director Scott Leney says commercial insurers are dropping rates in some accounts and showing little competitive interest in others. In previous soft markets premiums were reduced across the board.

Launching Marsh’s authoritative Insurance Market Review last week, he said most commercial insurance buyers are benefiting from the soft market conditions but renewal results point to a two-speed market.

He says corporate accounts with unattractive loss records or those perceived to have paid poor attention to risk management are “being largely ignored” by insurers, and others are facing premium increases.

“Despite the increased capacity created by new players entering the market, and the competitive response from incumbents, insurers are still being cautious with accounts that present as potentially loss-making,” Mr Leney said.

“In essence, insurers are all holding out for the accounts that are profitable, and we have started to see insurers walk away from deals thought to be underpriced.”

The report points to healthy insurer profits as the main reason for the competitive environment, despite the cost of severe weather events.

“Underwriting profitability, rebounding interest rates, the relative stability of the investment market and the continued flow of risk capital and capacity have also contributed to the soft market conditions,” Marsh says.

And the report forecasts soft market conditions in Australian commercial insurance will continue into the next renewals period.

“There’s little to suggest that the competitive momentum driving rate reductions will slow by year’s end,” Mr Leney said.

He believes renewals in the first quarter of next year will experience “pricing improvements”, but also warns lower underwriting profits will “contribute to a tempering of further rate reductions”.

This year’s third-quarter renewal results across Marsh’s corporate portfolio saw a spread of -20% to +10% on property renewals, and -40% to +20% on liability renewals.

In the middle market and SME segments, Marsh reported a narrower range of results with -10% to +10% for property and motor risks and -5% to +5% for liability risks.

The report shows directors’ and officers’ liability and crime insurance rates continuing to trend marginally upwards, while policyholders with favourable risk profiles are enjoying flat or “rollover” premiums. Professional indemnity rates are experiencing average increases of at least 5%.