Insurance Landscape 2018

19 April 2018

Setting Budgets for your insurances can be a difficult task, especially in this volatile and changing insurance climate.

To help you navigate this minefield, we have provided an overview of the insurance landscape and what to expect in your upcoming 2018 renewal.

Primary factors include a hardening insurance market and legislative changes to the Terrorism ACT and Emergency Service Levy.

Set out below an explanation of how these changes may affect you.

Hardening Market

Following a 5-year cycle of record low premiums, the Insurance Industry is beginning to experience a hardening market.

APRA’s year end statistics showed, in the five years from 2012 to 2017, insurers total investment income had reduced from $5.2 billion to $2.6 billion.

Years of competitive markets and rate reductions have eroded pricing adequacy and insurers are now implementing strategies to recoup losses.

Insurers are tightening underwriting guidelines and withdrawing capacity for certain risks, particularly those perceived as ‘high hazard’ or poor performing risks.

These perceived risks are now becoming more difficult to place and insurers are reviewing remediation strategies across their portfolios including:

  • Premium Increases
  • Increases in Deductibles
  • Reduced covers
  • Withdrawn capacity

A recent JP Morgan & Taylor Fry publication expresses a projected 8% increase in premiums for commercial property in 2018. This does not take into consideration additional costs associated with Government Levies and Terrorism costs.

Mother Nature has also made an impact on Insurers results, both locally and worldwide.

These catastrophes have a flow on effect and increase the cost of reinsurance for insurers including those in Australia.

Buildings in higher catastrophic exposed areas will also continue to come under pressure as results in these areas continue to erode insurers profits.

Quality buildings with sound performance and a proactive approach to risk management and improvement will fare better than the average.

Our view is that this market will continue to harden into 2018 and 2019 and insurers will continue to steer their portfolio’s back to an acceptable level of pricing and performance.

Additional factors to take into consideration 

Additional factors which may contribute to premiums in 2018 are the Terrorism Levy and the Emergency Service Levy.

Both of these Government Levies will contribute to higher premiums this year for most polices.

Related BAC articles are set out below setting out additional information on these topics.

ESL:                     www.bacbrokers.com.au/nsw-emergency-services-levy-esl/

Terrorism:           www.bacbrokers.com.au/terrorism-insurance-changes/

Please ensure your committee take this into consideration when preparing annual budgets.