Since our July 2024 market update, there is a continued softening of premiums for commercial property insurance policyholders who have sound risk management strategies and no claims. Policyholders who have identified risk exposures and adopted strategies to mitigate loss may see, on average, a 5 per cent rate reduction. Additionally, insurers are offering improved policy conditions as an incentive to insureds as they seek to grow their portfolios.
Premium rate reductions follow some softening of the catastrophe reinsurance markets. Reinsurance markets are generally softening due to higher investment returns and some consolidations in the market, causing an excess of reinsurance capacity, however, there are some exceptions.
The US wildfires are shaping up to be one of the costliest disasters in US history. Analysts estimate that the insurance price tag could be more than $US20B ($32B). This has followed Hurricane Ian, which was the third-costliest hurricane season on record. These global events continue to apply significant pressure to the reinsurance sector. As reinsurers push up premiums to cover their losses from natural disasters, local insurance companies will be forced to do the same. Risk reduction is vital to control these rising insurance costs. Without action, insureds will be left with insurance stress either with significant premiums or ineffective coverage.
Those properties deemed high-risk, catastrophe-exposed, poorly risk-managed, and claims-affected are not receiving reductions in pricing or improved policy conditions.
There continues to be increased appetite from new and existing underwriting agencies in the Australian market whose focus is primarily on small to medium business property risks. This increased appetite and competition creates ideal conditions for policyholders to seek more favourable policy terms and lower premiums.
Home and contents insurance premiums continue to increase at above-inflation levels. This is largely due to continued extreme weather events alongside the rising cost of labour and materials. This has not only resulted in an increase of the average cost per claim, but the nature and severity of weather-related matters has led to increased overall claims lifecycles. The State of the Climate Report 2024 published by the CSIRO has found Australia’s weather and climate has continued to evolve with longer fire seasons and more intense heavy rainfall events expected, making flooding more likely.
As market conditions evolve, proactive risk management remains essential. Get in touch with an Advisor to explore premium reductions and develop an effective insurance strategy aligned with these evolving conditions.
