Property rates rise, cover restrictions toughen
Property rates across all classes of risk rose between 8 per cent and 15 per cent in 2011, with insurers also looking to impose cover restrictions in both Australia and New Zealand, according to Marsh.
In its latest report, Navigating the Risk and Insurance Landscape: Pacific Insurance Market Report 2012, the broker said the full extent of losses arising from the Thailand floods, Christchurch earthquakes, Melbourne hailstorm and the current floods in northern NSW and Queensland coupled with the renewal of reinsurance treaties, means current market conditions will continue and could potentially worsen in 2012.
Although the catastrophic losses of 2011 have been absorbed by the Australian insurance and reinsurance industry, exposure to bonds issued by European countries with sovereign debt problems, interest rate reductions and fall share prices of listed insurers could cause a mild reduction in risk capital, the report said.
Cover restrictions
In addition to the impact on premium rates, the report signalled that insurers are looking to impose cover restrictions such as sub limits for Australian flood and New Zealand earthquake cover; site value based deductible structures being applied to flood; and a doubling in New Zealand site value based deductible structures.
Marsh added that cover for unspecified worldwide suppliers and customers and other related forms of indirect contingent business interruption coverage is being reduced or removed entirely.
Similarly, select insurers are looking to expand the list of excluded catastrophe perils such as California earthquake, Australian flood, New Zealand earthquake, Chile earthquake and possibly, Thailand flood.
Earthquake capacity
The report explains that although the impact of the Canterbury earthquake on the New Zealand insurance market is now better understood, the ability to obtain full earthquake insurance in the medium to longer term remains uncertain as insurers begin to reach the limits of capacity they are able to provide for Wellington.
This situation has stemmed from Ansvar Insurance New Zealand’s decision to cease to offer earthquake cover at the end of 2011 as well as Zurich’s decision to stop underwriting natural disaster cover for locations south of Waikato.
Marsh adds that there was a focus from insurers on obtaining increased premiums and applying increased deductibles for natural peril disasters throughout much of last year. This, coupled with the restricted coverage such as ‘unrepaired damage’ clauses which remove liability for damage to a building where there was previous damage, means the market is entering a hard phase.
Casualty market
Unlike the property market, capacity in the casualty market remains plentiful, with the appetite of certain insurers having resulted in premium reductions for a small number of clients, while the majority of businesses renewed with flat premiums and expiring terms and conditions, the report added.
- Categories
- Insurance
- Tags:
- Marsh, Navigating the Risk and Insurance Landscape: Pacific Insurance Market Report 2012
- Author:
- Angela Faherty, afaherty@financialpublications.com.au
- Article Posted:
- February 07, 2012
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