Challenging buying conditions for insurance in 2019: Honan
The Hayne Australian Royal Commission, re-submission of Lloyds business plans, Brexit, economic factors and an overactive merger & acquisition environment are expected to impact the insurance industry in 2019, according to the Honan Insurance Group.
“We are already witnessing global underwriting markets in Lloyds ceasing to write certain classes of business such as Professional Indemnity and Marine – and we expect this to continue,” Honan CEO Australia and New Zealand Andrew Fluitsma said.
“Honan also expects a continuation of upward pricing pressures throughout 2019, bringing with it another challenging buying year for businesses. Insurer risk selection and appetite will continue to drive underwriting behaviour leading a growing rating / pricing gulf between low hazard and less desirable occupancies.
“Underwriting profitability remains the key performance metric in the medium term as insurers continue to focus on good performing and risk managed businesses.
Claims pressure from settlements in securities class actions is likely to be a factor for the foreseeable future with Side C/ D&O insurance.
Certainty of recommendations and changes will be further clouded should there be a change in government at a federal level.
Honan’s Market Update affirmed that after almost two decades of favourable buying conditions, 2017 and 2018 saw the beginning of significant change; a change and market dynamic which will continue and accelerate in 2019.
Throughout 2018, insurers found themselves in a challenging position, whereby previous strategies to build market share through top line premium growth were replaced with the need to bolster bottom line profitability.
With this approach came a willingness to walk away from business should the underwriting re-calibration not yield acceptable levels of profitability.
Communication and relationships are pivotal said Travis Wendt, Honan’s Head of Broking & Carrier Management.
“Relationships flexibility still exists in the wider market but only if the right messages are communicated – and communicated early.
“Insurer selection, transparency, relationship management and “selling” your individual risk profile to the market is critical to not only help mitigate prevailing market issues but also to assist your company to stand apart during this market correction”.
“Honan is proactively driving the renewal process earlier for clients to allow adequate time to address any surprises or consider strategies which may mitigate underwriting volatility”.
Highlights of Honan’s December 2018 Quarterly Market Update
▪ Food & Beverages We are seeing a significant correction in pricing for non-desirable, high hazard business. F & B related accounts (packaging, processing and storage related) have seen major withdrawals of market capacity locally brought on by the frequency/severity of fire & stock losses, construction from combustible materials such as EPS (Expanded Polystyrene) and low levels of automatic protection.
This is being brought on by frequency of claims, ageing infrastructure, combustible materials used in construction and a lack of fixed protection (automatic sprinklers and smoke detection).
▪ Queensland & Western Australia to face tighter conditions Insurers are actively controlling their sideway exposure to Natural Catastrophe perils such as weather, flood and earthquake, where the impact is mainly felt in Queensland and Western Australia.
This is being seen in a tightening of underwriting in the form of reduced limits, increased pricing and capacity withdrawals. This underwriting discipline has been brought on by increased reinsurance costs, increased net retentions emanating from the events of 2017.
▪ Directors & Offices Financial Lines underwriters are focussing on (and already been actively remediating) their Directors & Offices portfolio, especially ASX listed entities that purchase Side C cover.
▪ Cyber Insurance market There has been an increase in the number of data breaches notified to the Office of the Australian Information Commissioner (“OAIC”).
The top 5 industries that reported breaches were health care service providers, legal, accounting and management services, finance (including superannuation), education and professional associations or “charities”.
