Businesses are increasingly seeking alternatives to traditional insurance in areas that remain difficult, but generally premium rate increases are moderating in most commercial lines, a Gallagher business insurance market conditions and outlook report says. 

Improved risk management and mitigation, a return to profitability for many insurers, and local and overseas capacity entering the market have contributed to market stabilisation, while negative factors affecting price and availability include extreme weather events, inflation, supply chain issues and labour shortages.  

In property, natural catastrophe exposed and high-risk property types remain challenging, while insurers are concerned about the impact of additional flooding. 

Gallagher says alternative risk transfer solutions, such as the use of captives and protected cell companies, are now commonplace considerations when conducting renewal discussions. 

“Previously the domain of large corporates, alternative risk transfer solutions are now being considered by mid-market companies with risks that continue to be hard to place at affordable pricing and with an adequate level of protection,” it says. 

“Other alternative forms of insurance, such as parametric covers, are also increasingly on the table for catastrophe-exposed businesses looking for flood or cyclone cover that isn’t available in the general market.” 

Insurers are requesting updated building valuations to ensure sums insured are adequate as the cost of property rebuild or repair work is blowing out in some cases, affecting claims ratios.  

In liability, premiums for good risks are recording moderate increases, while loss affected and higher hazard liability risks remain difficult. 

“Issues surrounding worker to worker and labour hire risks remain problematic, with workers’ compensation insurers looking to reclaim costs by suing other insurers under their liability policy on the basis that a safe place to work wasn’t provided,” the report says. 

Other difficult areas are amusement rides that lift and spin, trampoline and inflatables entertainment centres, thermal coal risks and tailing dams and businesses with high bushfire exposure. 

More exclusions are beginning to appear related to the use of PFOS and PFAS chemicals as the health concerns surrounding the substances builds momentum, while Gallagher says in general insurers are alert to the potential for increasing social inflation to affect loss developments on long-tail risks. 

Professional and financial lines premium increases are levelling out and in cyber there’s been some easing of the dramatic price increases that many companies have experienced. 

The issue of data destruction has come into focus, with underwriters and regulators asking for detailed information about the security controls a company has in place to protect customer or other sensitive data, whether the information is privately identifiable and how they deal with the purging of that data.  

“Companies need to be able to demonstrate that they fully understand their risk, and that they know where their critical data is, who can access it and how they are protecting it,” Gallagher says.  

Business email compromise incidents are increasing, with targeted attacks by hackers accessing vulnerable systems and diverting funds. Reports of malicious links and suspicious language detected in emails have risen significantly. 

Workers’ compensation premiums are increasing at a moderate rate, and mental health claims are beginning to have a material impact. 

Gallagher says in the managed fund states of NSW, Victoria, Queensland and SA, where the government sets the workers’ compensation rates, all except Queensland have moved to a hard market, with costs being passed on to businesses. 

“In Victoria, premiums are expected to remain fairly stable until the state election late in 2022, but come 2023 increases are likely to flow through due to the scheme’s negative funding position,” it says. 

The report is available here.