08 May 2008
AUSTRALIAN INSURANCE MARKET SUSCEPTIBLE TO CHANGE
Sydney, 8 May 2008
After years of falling insurance rates for most companies, the market in Australia has become more vulnerable, according to the latest market review issued by insurance and risk advisor, Marsh.
The report states that for the first time in many years, the commercial insurance market is susceptible to change and there is now a greater possibility of future rate rises.
"There are now clear signs that the Australian market is taking a more conservative view as the combined effects of the accelerated nature of our down-turn in premium rates, weather-related catastrophe claims and deteriorating investment returns begin to bite at insurers’ results," the report states.
Head of Placement Services at Marsh, Scott Leney, said these conditions mean there will be a broader range of renewal outcomes for businesses during the remainder of 2008.
"There is still the potential for companies to achieve savings, but insurers and reinsures will scrutinise individual exposures looking for tangible evidence of risk improvement," Mr Leney said.
According to the report, the conclusion of the December renewal season in 2007 maintained a yearly average of reductions of 9% for property classes of insurance and 7% for liability classes, but "there were examples of prices increasing for risks associated with unacceptable claims activity or for which risk management standards had not been maintained".
In what is a further sign of a changing market, shifts in premiums for financial and professional lines of insurance (like Directors’ and Officers’ coverage), during the last renewal season ranged from a reduction of 5% to no change at all.
The report also states that companies should attempt to consolidate relationships with preferred insurers that have a stable track record, irrespective of the market cycle.
"The next 12 months will be a period of uncertainty after which the market may either recover through a period of benign loss conditions or harden as a result of continued deterioration of financial results."
For a copy of the Insurance Market Review, please contact your Marsh advisor.
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