Insurers’ risk appetite has dampened further as the industry continues to count the cost of the NSW/Queensland catastrophe, which has now surpassed the 2011 Brisbane event as the country’s most expensive flood disaster.

Honan Insurance Group says major flooding events across Australia’s east coast are having a significant impact on renewals, causing uncertainty around rates as initial claims materialise.

“As a result, insurers are likely to continue reducing their exposure in flood-prone areas through increased deductibles, annual aggregated limits, or excluding cover altogether,” the broker says in its Q3 Market Update. “The long-term impact is of course yet to be seen.”

The Insurance Council of Australia’s (ICA) latest update last Friday estimates the current cost of claims from the NSW/Queensland catastrophe at about $2.523 billion.

ICA data for the 2011 Brisbane floods puts the cost of the disaster at $2.38 billion on a normalised loss basis – a way of calculation to give a present-day perspective of historical events.

Honan Head of Placement Travis Wendt says the broker is expecting insurers to only focus on “exposed locations” in NSW and Queensland as they review their pricing and underwriting models.

“Having negotiated renewals and new business placements throughout April, insurers are comfortable in offering flood cover with minimal impacts on pricing where they deem there to be no exposure,” Mr Wendt told insuranceNEWS.com.au.

He says insurers are increasing the premium to purchase flood cover in high hazard zones, while at the same time reducing the amount of flood cover they provide.

“Conversely they are also increasing policy excesses for properties in high-risk areas,” Mr Wendt said.

“Given the severity and now frequency of these flood events, insurers are taking a view that they are no longer sudden or unforeseen and as such need to factor them into their underwriting and pricing models. These will be passed directly onto policyholders.”

He says it’s too early to provide an actual percentage increase in premiums as the true picture is still not known at this stage.

“We expect pricing to increase significantly with the level of increases driven by claims performance and the limits required.”

In the Honan market update, the broker says the casualty market continues to underwrite on a case-by-case basis.

“Underwriters are still seeking small rate increases of 5% for low hazard renewal business, however, for more exposed segments, pricing continues to increase in excess of 30% as capacity declines,” Honan said.

Turning to financial lines, Honan says cyber attacks targeting supply chains are the major concern for technology professional indemnity (PI) and cyber insurers.

Incidence of supply chain attacks grew by 430% in recent times, Honan says, as threat actors continue to leverage third-party vendors and technology service providers to gain access to their targets.

Last year 35% of all companies experienced at least one cyber ransom incident, and ransomware attacks cost businesses more than $20 billion globally, up from $325 million in 2015.

“Ransomware and cyber extortion continue to be the main threats,” the broker says. “Ransomware is now the fastest growing, and one of the most damaging types of cybercrime.”

On directors’ and officers’, Honan says liability and retention rates have moderated significantly since the peak of the hard market.

Insurers continue to focus their underwriting on business’ financial health, covid resilience, and environmental and social governance concerns including cyber risk management.