Marsh chief sees premium rises on the way
The local commercial insurance market is in for a “correction” in rates, but not on the scale of the premium rises of the 1990s, according to Marsh Pacific CEO David Bidmead.
He told an insurance conference in Sydney this morning that the turmoil in global financial markets is likely to contribute to the beginning of a correction after several years of soft conditions.
“Financial woes around the world will impact the availability of risk capital in several ways,” he said. “Insurers are being hit with subprime-related claims, such as directors’ and officers’ (D&O) liability claims in response to financial writedowns and losses.”
He says the deteriorating capital position of insurers may also affect capacity in the insurance market and Marsh expects reinsurance costs to rise.
“All of this may stimulate a more conservative approach to the management of the current cycle,” Mr Bidmead said. “It may reduce competition and contribute to the beginnings of a market correction.
“It is important to note, however, that we are likely to avoid a more acute correction, which was a hallmark of the changing insurance cycle in the 1990s.”
He says this view is supported by “strong evidence of prevailing competition” in the local Australian market, with Marsh data revealing flat outcomes, on average, for September renewals.
And Mr Bidmead also predicts a “change in customer confidence” will alter the way they relate to insurers.
“In recent times, there has been a trend toward consolidating deeper, more meaningful relationships with insurers, reducing the total number of underwriters on a program,” he said.
“Customers are now questioning the ongoing suitability of this approach and they are likely to consider syndicating their risk to a broader panel of insurers to achieve greater economic and geographic spread, avoiding exposure to any one particular insurer.”
He told an insurance conference in Sydney this morning that the turmoil in global financial markets is likely to contribute to the beginning of a correction after several years of soft conditions.
“Financial woes around the world will impact the availability of risk capital in several ways,” he said. “Insurers are being hit with subprime-related claims, such as directors’ and officers’ (D&O) liability claims in response to financial writedowns and losses.”
He says the deteriorating capital position of insurers may also affect capacity in the insurance market and Marsh expects reinsurance costs to rise.
“All of this may stimulate a more conservative approach to the management of the current cycle,” Mr Bidmead said. “It may reduce competition and contribute to the beginnings of a market correction.
“It is important to note, however, that we are likely to avoid a more acute correction, which was a hallmark of the changing insurance cycle in the 1990s.”
He says this view is supported by “strong evidence of prevailing competition” in the local Australian market, with Marsh data revealing flat outcomes, on average, for September renewals.
And Mr Bidmead also predicts a “change in customer confidence” will alter the way they relate to insurers.
“In recent times, there has been a trend toward consolidating deeper, more meaningful relationships with insurers, reducing the total number of underwriters on a program,” he said.
“Customers are now questioning the ongoing suitability of this approach and they are likely to consider syndicating their risk to a broader panel of insurers to achieve greater economic and geographic spread, avoiding exposure to any one particular insurer.”