The outlook for Australian insurance buyers is more positive moving into the second half of the year, with a trend of premium increase moderations established in the first half in some areas likely to continue, Marsh says in a mid-year update for the local market.

Head of Global Placement, Marsh Asia Pacific John Donnelly says the first half also saw improved insurer results compared to the prior period, following the increasing premium rates in recent years.

“If this profit trend continues through the rest of the year, we expect market competition to increase, resulting in a better purchasing environment and outcomes for insurance buyers,” he says.

The first signs of property premium increase relief have become apparent, after the market peaked last year with average increases of 25-30%, but challenging conditions continue.

“Clients who have experienced consistent premium rises since 2017 are now starting to see a moderation in rate increases,” the report says.

The relatively low catastrophe count during the first six months in Australia and globally was a key driver of the shift, but the impact of July European floods is expected to be significant.

Natural catastrophe coverage continues to be a major issue locally, reinforced by Australian east coast weather events. Flood, wind, hail, and bushfire limits are being imposed, with further restrictions introduced by limiting coverage to annual aggregate limits.

As profitability begins to return in the Australian property market, it is expected that the remainder of the year will see further easing of rate increases, with local and overseas insurers slowly returning capacity, Marsh says.

This will enable limited competition and stability to return to the market, as well as more consistency in the terms and coverages available, it says.

In liability, market uncertainty continues to grow as a result of the pandemic, the precedence of particular catastrophe claims, and the emergence of an intensifying cyber risk landscape.

The challenges experienced last year have remained well into the first half for local and global casualty (liability) markets.

The financial and professional lines insurance market overall is in a more stable position than it was 12 months ago.

Marsh says recent legislated changes to continuous disclosure obligations, which have made temporary changes permanent, should be beneficial for directors’ and officers’ (D&O) cover.

“This is a significant and positive development, which we hope will have a profound impact in the D&O space in reducing claims activity, reducing pricing and improving the availability of coverage in general,” Mr Donnelly says.

Nevertheless, improvements may not occur immediately as insurers may look for a period of ‘clear air’ to demonstrate that the environment has changed and claims costs will reduce.

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