Positive outlook for insurance buyers in Australia, says Marsh

The general outlook for insurance buyers in Australia is positive according to Marsh, with the return of market competition from existing insurers as well as the introduction of some new entrants.

In its Mid-Year Insurance Market Update 2024 Australia, Marsh says: “Across most insurance classes, insurers’ premium pools have grown and rates have stabilised. Combined with improving loss ratios and higher investment returns from high interest rates, these factors have led to significant improvement in financial results for insurers.”

Scott Eccleston, head of global placement, Pacific, Marsh, says: “Overall, the first half of 2024 saw a significant improvement in market competition and the return of insurer choice for buyers, which had not been generally seen since 2017. Barring catastrophic losses from the North American hurricane season or other unforeseen events, continued improvement is likely in the purchasing environment for insurance buyers.”

For property, the first half of 2024 saw the return of price competition, with insurers increasing their premium income targets for the year as they transitioned into a growth phase against the backdrop of strong underwriting results over the last 12 months, says Marsh. The first half of 2024 saw insurers focused on their growth strategy and competing for market share by increasing capacity or broadening their appetite. With the majority of insurers looking to grow, this generally led to lower prices and/or broader terms and conditions being offered in an attempt to secure more business, says Marsh.

In the first half of 2024, Australian property insurance rate changes typically ranged from 10% reductions to 5% increases at renewal. Property insurance rate increases started to moderate in the second half of 2023 in the Pacific region. Marsh says the international market will likely play a significant role in providing insureds with options in capacity and drive further price competition in the local market.

On the liability side, market conditions eased considerably in the first half of 2024, with new and expanded capacity within the Australian and London markets in 2023 continuing. In 2023 and continuing in the first half of 2024, insurers focused on inflationary exposure and loss trends. “Some insurers sought inflationary increases in their pricing, although increased market capacity and options generally worked in insureds’ favour. Consequently, more insurers renewed policies close to expiring terms and conditions,” says Marsh.

It adds: “Year-on-year rate increases averaged 4% in the fourth quarter of 2023, which fell to 1% in the second quarter of 2024. In the first half of 2024, many insureds experienced rates at flat to 2% increases across the Australian liability insurance market. Placements with more challenging circumstances typically experienced higher increases or coverage restrictions.”

Price reductions and a general improvement of market conditions in the Australian D&O market, as supply continued to outpace demand, continued in the first half of 2024. There were a number of new entrants in the local D&O market, while more London-based insurers pursued Australian risks, with a number of them having appetite for primary layer or low attachment point participation, says Marsh.

The broker says that as rates fall, greater discipline is expected to return to underwriting, which may impact pricing in the longer term, adding that despite buyer-friendly market conditions, stringent underwriting remains in the D&O market.

As for cyber, market conditions have improved considerably over the last 12 months. “Easing of terms and pricing were driven by general improvements in cyber hygiene and an uplift in insureds’ cyber risk maturity. Improved insurer rate modelling and increased demand for insurance solutions also contributed to market stabilisation,” Marsh notes.

Overall capacity increased with the entrance of new cyber insurers into the Australian market, while incumbent insurers generally increased their share on existing programmes, with some Australian insurers now offering limits of up to $15m on either a primary or excess basis, which represents a 50% increase compared to the $10m limit typically offered in 2023, says Marsh, and insurers were also more willing to work with insureds to broaden coverage.

In the first half of 2024, most cyber insureds experienced flat rates or reductions. While 2023 saw rate increases typically in the 10% to 20% range, in the first half of 2024 rates at renewal were typically flat to 10% decreases, the broker says.