Most underwriting agents agree rate increases in liability this year are generally between about 20 and 30%. But when will they level out? That’s a question that’s a lot harder to answer. 

The answers varied when Sunrise Exchange News asked underwriting agencies around the country exactly when rates will begin to plateau. Some say the market will notice a drop in rates in a year, while others argue the rates probably won’t drop much at all. What is certain is that capital is still very tight, and markets like Lloyd’s are being very cautious.

Concord Insurance Group’s Underwriting Marketing Services, which specialises in the liability market, has seen a subdued renewal season, says Executive Director Ian Parsons. But the next couple of weeks will see a “flurry of activity” from brokers.

He agrees with other underwriting agency chiefs that brokers aren’t focusing heavily on renewals, because preparations for Australian financial services licensing are keeping them preoccupied. And he says it’s important for the market to remember rates aren’t just driven by Australian underwriters – foreign reinsurers have a lot of say on which risks can and can’t be covered.

“At the moment it would be correct to say that in terms of liability risks, increases are generally between about 20 and 30%,” Mr Parsons said. “It is hard to say where they will go from here.”

Rates will continue to remain higher than they need to be until governments take a united approach on premium taxes, he said. “We won’t see any real significant change until that happens.”

Universal Underwriting Agencies has released its renewal increases as early as possible, says MD Denis Gibbes. Brokers have generally accepted rises of about 10 to 15%, but he says liability rates in some cases have been increased by up to 80% on top of last year’s increases – “and that’s if there is cover available.”

“I feel sorry for brokers because in the past it was relatively easy for them to obtain cover on just about any risk,” he said. “Right now a lot can’t be written, and Lloyd’s isn’t covering many risky areas in England, so they can’t do a lot here either.”

And as for this month’s renewal season, Mr Gibbes says Universal is finding it “reasonably quiet and civilised” although he predicts the last two weeks of this month will be hectic.

Dominion Underwriting Agents GM David Pool says liability risks are so complex that it would be wrong to put an average percentage increase on rate hikes. The Cairns-based underwriter says there continues to be “a lot of cleaning-up” when it comes to more difficult risks, and risks will continue to be rejected over the year.

“Lloyd’s has obviously cut back a lot on what they’re covering, so we’re having to go to other facilities to write certain risks, and that of course incurs additional expense,” he said. “But I’d suggest over the next year rates will begin to somewhat even out.”

Mr Parsons says the main concern for underwriters at the moment is market stability. He says the last thing the market needs is a “culling of rates as seen in the past”; the industry needs to maintain its return to profitability. The lack of profit in Australia’s liability market diminishes its reputation abroad, he said.

“Overseas, Australia’s insurance market – particularly in terms of liability – is seen as pretty poor and unprofitable. But that image has the ability to change over time.”