29 August 2018
2017 has been reported as the “costliest year in history” for the global insurance sector.
Total global economic losses from natural disasters were approx. $US330 billion ($425 billion), almost double the 10-year average.
This wave of worldwide catastrophes, leading to higher reinsurance costs, is now having a flow on effect into our domestic insurance market.
Beyond increasing premiums, these events have also resulted in a reduction of capacity, as property insurers tighten their guidelines and attempt to cap their overall exposures.
This “capacity crunch” is particularly evident on larger developments, where insurers are scaling back the limits they can offer. As a result, we are experiencing an increase on the reliance of co-insurance support, to ensure properties maintain full coverage.
Whilst co-insurance can be utilised as a method to manage this trend, it too has limitations as it typically relies on the participating insurers agreeing on terms and conditions.
Further compounding to this issue is the notion of accumulation risk, which refers to an insurers total exposure within a given area or region.
An increase in high value developments within close proximity to each other, has seen insurers unable to provide support on individual properties because they have exhausted their capacity on neighbouring developments.
In consideration of the above and the scale of recent developments, particularly in Sydney, uncertainty has now been placed on the long-term availability of insurance capacity.
Now more than ever, it is important to align yourself with an established industry specialist, who can effectively manoeuvre through the obstacles of the current insurance environment