The increased insurance capacity and competition that was a feature of the global market last year is showing no signs of easing, according to reports.
There is a flat-to-lower trend in premiums for Australian lines such as property, general indemnity and directors’ and officers’ insurance, with exceptions for less-attractive risk areas.
In property, rates have come under pressure following a “massive drop-off” in worldwide natural catastrophes following the spate in 2010-12. A rise in capacity fuelled “unprecedented” competition in the global property market last year.
The market has also faced pressure from businesses taking on more risk and opting for lower premiums and reduced cover, as the uncertain economic environment encourages cost-cutting drives.
Ex-Tropical Cyclone Oswald was the only major disaster to affect Australia last year amid a benign global environment. The Insurance Council of Australia (ICA) says flood and storm damage caused by Oswald in NSW and Queensland topped $1 billion.
So far this year ICA has declared catastrophes for Perth bushfires, which have cost $15 million, and Cyclone Ita, which crossed the Queensland coast earlier this month.
In general liability, rates have hardened for bushfire and offshore energy exposures, while intense competition and surplus capacity in other areas is keeping premiums flat to lower.
Capital investors are seeking the Australian insurance environment as a safe haven for their investments and are entering the market in large numbers. This has extended the soft market conditions and these circumstances won’t change until the capital flow is tempered.
Such competition means no one wants to be the first to increase rates, and these conditions are forecast to remain much the same over the next six months to a year.
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