Hard market conditions may have peaked, broker says  

Some product classes may see rates moderating in the lead-up to the June renewal season after market conditions peaked last year, Bellrock Broking says in a January update. 

Lloyd’s decision to direct capacity into the Australia market is also a contributing factor, according to the broker. 

“Throughout November and December 2022, evidence of the intent of Lloyd’s of London to again actively participate in Australia has become clear having sourced several highly competitive placements across that market,” Bellrock says. 

“We welcome the new competition from London, particularly for policyholders who have struggled, during the hard market, to find an insurer ‘partner’ receptive to their risk profile.” 

Bellrock MD Marc Chiarella says the broker visited Lloyd’s in October and the trip yielded “encouraging” signs for the Australian market. 

“Underwriters in that market are recommencing to ‘differentiate’ complex risk managed placements,” he said. 

The Bellrock update says market conditions stabilised at the end of calendar year 2022, noting the “insurance clock” is now at 12 o’clock, a position that means hard market conditions “may have reached their peak” for many industries. 

“We consider that there may be opportunities for reductions across some classes in or around June 30,” the update says. 

However, the easing of conditions won’t be across the board. Cyber, high-risk property and professional indemnity for various professions – particularly construction professionals, contractors and developers – and financial services remain exposed to hard market conditions, the update says. 

Here is Bellrock’s take on the following classes: 

Property 

Following increases of circa 10%, rates are expected to be stable. Insurers are focusing on sub-limit and deductible exposures particularly regarding floods and natural catastrophes. 

Updated insurance valuations are playing a major role in renewals with insurers requesting additional information to confirm the adequacy of coverage being provided (Construction costs have increased 25% over recent years). 

Liability 

Liability rates for low-risk businesses are obtaining minimal increases, mostly in-line with inflation. However, premiums for high hazard liability and frequency-exposed business continue to cause problems for underwriting. Bushfire exposure, worker to worker, mining and coal are the areas of main concern. 

Insurers remain on alert for long-tail risks and will continue to monitor portfolio profitability accordingly. 

Cyber 

Cyber is now considered a key part of business risk management at a board level and perceptions have shifted from the previous “IT department” issue. 

The market remains very selective and having the right risk profile to present to insurers is vital as best practice protocols are heavily scrutinized. Market conditions remained challenging. 

Directors’ and Officers’ 

D&O rates have eased. Throughout 2022 new capacity has entered the market from London. There has also been revised flexibility from local Australian insurers which brought competition across most industries and professions. Driven by the confidence that Covid-related impacts had diminished, renewals late in 2022 started to see some pricing reductions.