Primary insurers are expected to raise headline premium rates by 6-12% to address higher reinsurance costs and claims inflation in the near to medium term, national broker EBM says in a September market update. 

The update lists higher claims costs, inflation, shifting reinsurance capacity and changing risk appetite among global reinsurers as some of the key factors that are influencing commercial pricing in the Australian market. 

“Inflation and the cost and availability of reinsurance will continue to be major issues for the market in the near term,” EBM says. 

“Moving forward, there will be different levels of capacity or appetite, at different levels of attachment of risk, which will influence the way reinsurance programs are structured.” 

Across several classes rate increases continue to moderate and in the directors’ and officers’ (D&O) line there are “clear and consistent” signs of softening, EBM says. 

A proliferation of insurers entering the market (both domestic and international) over the past 12 months boosted capacity and drove competition for risks including private companies, smaller listed companies, companies outside of the ASX200, IPO opportunities, Side A and B Only and excess layer placements. 

“The result was a more competitive market, with insurers offering renewal terms at ‘expiring’ or reduced rates,” EBM says. 

“The stabilisation of the directors’ and officers’ (D&O) market continued, with flat to decreasing premiums and significant increases in capacity with some insurers taking a greater proportion of risk in terms of what they previously may have capped or offered, known as ‘line size’.” 

D&O rates generally fell by 10% more for both primary and excess layers among new and legacy insurers, according to EBM. 

Property remained hard but there were exceptions, especially for large property risks seen as “high quality” in locations not exposed to catastrophe risks. 

Premium increases in single digits were standard, with loss-affected/challenging risks and natural catastrophe-exposed clients seeing higher rises of up to 25%. 

“Insurers are expected to continue examining risk exposures within their property portfolios following changes in the reinsurance market and in response to NatCat risks,” EBM says. 

“Any changes in appetite or capacity are likely to impact the property covers in terms of premiums, deductibles and coverage.” 

Here is EBM’s take on other commercial lines: 

Professional and financial lines 

Softening market conditions were tempered by a challenging claims environment. Overall, financial and professional lines pricing decreased during the first half of the year. 

Within the professional indemnity (PI) market, rates varied based on industry, size and fee growth. Insurers were increasingly open to renewing on a flat premium basis and clients with a positive claims history and strong internal protocols were offered options and competitive pricing. 

Capacity remained relatively constrained overall, and some insurers increased deductibles. 

Cyber 

As client cybersecurity improved, insurer sentiment was also more favourable with greater capacity and pricing levelling off or decreasing. 

Having satisfactorily de-risked their portfolios over the last 24 months, insurers have shifted their focus towards targeted growth. 

Throughout 2023, the cyber insurance market has continued to stabilise with pricing either levelling out or decreasing, limits increasing, and competition leading to more customised underwriting decisions that align with a client’s risk profile. 

Marine 

A myriad of challenges continued to impact the marine insurance industry including severe weather conditions, disrupted supply chains, high catastrophe losses, increased reinsurance costs, uncertain macroeconomic conditions and geopolitical tensions. 

Premiums have continued to rise. Clients with a clean loss history and no major changes to material facts saw single-digit premium increases. Poor performing accounts saw greater increases (upwards of 10%), with prices varying widely based on losses. 

Construction 

Natural catastrophes, business interruption and supply chain disruption risks continued to plague the construction industry and impact insurance. 

Clients in NatCat zones experienced rate increases, however the impact has lessened in comparison to previous years. 

Detailed underwriting submissions for insurers are of paramount importance in the insurance review process resulting in information being sought at a far more granular level than in previous years.