Navigating today's business insurance – Market Overview Report H2 2019
Published 25 November 2019
The just-released Gallagher Market Overview Report delivers a big picture perspective covering structural changes within the insurance market and their impact on underwriting requirements ‒ and what this means for your business.
Your source of current insurance market trends and analysis
As a trusted advisor, we want to equip you with information and insights that will assist you in managing your business needs of today and in devising forward-looking strategies for the evolving conditions of the future.
During the final quarter of 2019 the expectation of continued current market transition remains, characterised by market exits and varied underwriter risk appetite. In this climate a carefully managed placement strategy and the expert advice of a corporate broker can prove invaluable.
Key insurance market trends
Lloyd’s of London is leading the decrease in capacity and demand for increased rigour in regard to profitability.
The Royal Commissioninto Misconduct in the Banking, Superannuation and Financial Services Industry recommendations also call for greater accountability.
Rate and premium movements have shifted market focus from operational risk management to balance sheet exposure.
Legislative change and regulatory scrutiny are increasing demands on company directors and boards.
Drought and extreme weather events are driving concerns about response to climate change, while secondary perils such as storms or flooding are driving insurance losses.
The Royal Commission findings resulted in the formulation of 15 recommendations specific to the insurance sector, giving industry regulators wider powers. Of particular relevance are changes to the advisory function that place a greater onus on insurers to ensure they have garnered sufficient information, involving an added focus on underwriting in the pre-contractual stages.
Globally Lloyd’s of London is leading the demand to address profitability issues by identifying underperforming syndicates and classes, which has resulted in a cascade effect that has removed some insurers from the market and limited capacity.
Now more than ever businesses need to adopt a strategic approach and tap the expertise of their broker in negotiating the transitioning market.
Continuing drought conditions have reduced the volume of premiums and the capital pool, resulting in very limited cover available on the basis of crop type and region. Significant gaps in cover have opened in the market for some primary producers, which introduces opportunities for developing innovative purpose-designed products.
Brace for premiums to reach new heights as market shrinkage – only two key providers remain to service the Australian aviation industry – severely reduces capacity both locally and through London. Add to this the falling Australian dollar inflating the cost of parts for maintenance as an additional driver of costs that may leave smaller, specialised operators stranded on the tarmac.
Class actions account for 90% of claims against company directors and boards against a background of growing investment in litigation actions, Royal Commission scrutiny and regulatory activity. Companies can expect underwriters to zoom in on financial stability, operations and performance, especially if you’re restructuring your business.
The average cost of a disruption to business that enforces suspended operations has climbed to US$6.7 million globally so it’s hardly surprising that companies rate it as their leading risk, but do you know how to evaluate the potential costs accurately and understand how to limit the cost of deductibles and premiums without sacrificing recovery resilience?
Insurers are taking a long view of clients’ public liability claims histories as damages claims take longer to resolve and involve higher costs and litigation funders hone in on the action. Seeking to offset shrinking profitability, providers are restricting availability to selected clients, which means you need to understand what they’re looking for.
Spearheading the issues around multi-storey building standards, the use of aluminium core panel (ACP) cladding has triggered a crisis in professional indemnity (PI) coverage for professional construction consultants and raised an estimated $2 billion dollar question about who will carry the cost of remediation, which has implications for your current cover in relation to past projects.
Gallagher estimates that two thirds of claims (excluding motor) we manage for clients are attributable to secondary peril events (such as storms, hail, flooding or fires) and that these are becoming primary drivers of claims loss for insurers. With 3D modelling and post code analysis as part of the risk assessment mix it’s a case of location, location, location.
For a number of industries and/or for certain risk exposures, businesses may find it increasingly difficult to obtain insurance. Follow our four steps to fully understanding what insurers are looking for in the current market and how to plan to present your business case.
Work with the insurer, sell your risk
Provide quality information
Identify potential risk reduction strategies for offsetting rising premiums
Tap your broker’s knowledge in formulating short and long-term plans
Your relationship with your Gallagher broker goes beyond insurance placement. A key aspect of our brokers’ role is advisory, to help you navigate market conditions, assisting with forward planning so you can manage the cost perspective and sell your risk to underwriters.
They can also help interpret changes to policy wordings and identify your business’s exposures or gaps in cover, and in the event of a claim act as your advocate in securing the optimal outcome achievable.
Our Gallagher experts have collated data from their recent experience of both the hurdles and the pathways to success in placing insurance cover in these transitioning conditions.
The insights we can provide benefit our clients through
breadth of vision ‒ as an international company with access to global resources and markets we’re positioned to interpret information from a pan perspective and translate it to local regions through knowledge gained from our extensive national network of Australian offices
sector specialisation ‒ we have decades of experience in a number of industries and provide risk advice and protection to some of the country’s and the world’s biggest brands
expertise ‒ our people draw on highly developed skills, whether that applies to risk analysis and advice or sourcing integrated solutions tailored specifically to your business’s needs, or steering a claim to an optimum outcome on your behalf.
Gallagher Managing Director ‒ Placement & Insurer Market Relations Mark Oatway
Corporate specialist Mark Oatway has a 30+ year record of placing challenging risks for some of the country’s and the world’s largest companies. His experience and knowledge are universally respected by the insurance sector.
National Head of Agriculture John van der Vegt With extensive industry sector knowledge, particularly of forestry, horticulture and viticulture, John van der Vegt has deep understanding of the role of insurance in supporting the agribusiness sector and of the impacts of the current conditions.
National Head of Specialism Damian Hooper
With a background with the largest aviation insurance provider in Australia, Damian Hooper has the experience and contacts network to guide his clients in securing the most appropriate solutions available.
National Head of Financial Lines Michael Herron and WA Manager
Drawing on experience in London and Australian markets, Michael Herron brings legal analysis to bear on C suite business exposures – and how to avoid them – and has advised wide variety of corporate and commercial businesses.
Professional & Financial Risks, John Muir
From a background in senior roles with the major insurers, John Muir has negotiated bespoke D&O insurance solutions for some of the world’s largest companies with national and international operations and subsidiaries.
Manager Corporate Natasha Barker
Natasha Barker brings more than 25 years of experience to understanding risks relating to corporates’ properties, with specialised knowledge of both the retail and real estate sectors.
Manager – Corporate, Corporate NSW & ACT, Ryan Gooley
Ryan Gooley has held key roles in the design and placement of insurance programs for corporate clients in the Australian, UK and Asian Markets, including major infrastructure projects.
Head of Claims Adam Squire
With a track record of leadership roles in large organisations, Adam Squire works closely with insurers, adjusters andclaims service providers to provide optimal claims outcomes for our clients.
Newcastle Area Director Mark Bramley
Mark Bramley has in excess of 25 years’ experience in the financial services sector, with 10 years in senior management positions. He consistently maintains a high level of adherence to risk and compliance measures.
To the extent that any material in this document may be considered advice, it does not take into account your objectives, needs or financial situation. You should consider whether the advice is appropriate for you and review any relevant Product Disclosure Statement and policy wording before taking out an insurance policy.