Premium rate increases in Australian property lines are expected to continue this year, according to the latest market review from broker Arthur J Gallagher.

Last year rates began hardening, “ending the long-term trend of 10-20% year-on-year premium reductions”.

The report attributes the turn to a number of factors, including cash rates hitting an all-time low, insurers earning insufficient return on investment and reinsurers looking for an increased return on their capital.

“Given these factors, we expect to see premium rates firming further throughout [this year],” the report says.

“In prior years insurers were able to write for an underwriting loss, as their investment returns would turn this into a gross profit, but this isn’t happening any more. Now we’re seeing insurers regroup, review rates on each line of business and adjust accordingly.”

Insurers are likely to be more selective in providing cover, and coverage could be less broad than previously, the Gallagher report says.

A number of insurers are also “digging in” on complex claims.

“Where there may have been more consideration from insurers in the past, brokers are now being asked to explain why non-straightforward claims should be accepted.”

The report also highlights the increasing importance and relevance of cyber insurance, especially given the passing of mandatory breach notification legislation.

“This is likely to come into force this year and, put simply, it’s a game-changer.

“There will soon be no place left to hide for corporate entities that don’t take the cyber-security threat seriously.”