Broker challenge: Non-vanilla risks

"There is just a lack of support," says broker

Broker challenge: Non-vanilla risks

Insurance News

By Daniel Wood

Finding coverages for non-vanilla, hard to place risks is always more difficult but many industry stakeholders say the challenges are growing. Brokers says insurers are showing an increasing lack of risk appetite across a number of insurance sectors.

“There is just a lack of support for non-vanilla risks,” said Anthony Di Fiore (pictured above). Di Fiore is specialty risks manager for Adroit Insurance and Risk, a Geelong-headquartered firm.

“We’ve seen premium increases across most classes and insurers hit their budgets by simply just writing vanilla risks,” he said. “That’s great for the insurers but the downside is that there’s a reluctance or reduced appetite for risks that sit outside the box and require a little bit of underwriting inspiration.”

Reduced insurer appetite and property risks

Di Fiore said this reduced appetite is making it difficult for him to support his clients. He pointed to property coverages as an example. Di Fiore said any property in a bushfire zone with dense bush has become very challenging to insure since the 2019 bushfires, including ski resorts, camping areas and caravan parks.

“We’ve even seen some regional clients, like the owners of old pubs in small country towns that are built mainly from timber – that’s now a huge fire risk  –  some of them have become uninsurable,” said Di Fiore.

Perhaps the mainland is now experiencing the broker challenges that another state was seeing in 2021? Eighteen (18) months ago, John Farrell, director of Steadfast Taswide Insurance Brokers, told Insurance Business about similar, growing insurance challenges in Tasmania.

Half of his state is rural, said Farrell, which means there isn’t a fully staffed fire brigade nearby – impacting the fire component of policies.

“If you phoned me today and said, ‘I’ve just bought the Evandale Hotel. It’s a lovely old building, it’s heritage, it’s the local watering hotel and upstairs, which hasn’t been used in 100 years, I’m going to turn that into a little bit of boutique accommodation with two rooms’ I would just about have a heart attack,” he joked. 

D&O continues to be problematic

In recent months, Victoria-based Di Fiore has seen a growing number of non-vanilla risk challenges.

“We just see a lack of appetite from insurers to investigate those higher or more complex risks,” he said.

Despite some reports that the insurance market for directors and officers (D&O) coverages is turning around, Di Fiore points to Side-C cover (or entity securities coverage) on D&O as an area of growing difficulties.

“Previously it was available for all clients and suddenly that market has simply evaporated and there’s less and less appetite for that business,” he said. “It’s another part of the industry where the insurance market simply walked away and clients were either having to pay extreme premiums or having to self-insure the risks themselves.”

Side-C cover protects a company against class actions.

In December, an Allianz Global Corporate & Specialty (AGCS) survey found that a potential recession, cyber and ESG concerns were key risk concerns for directors and officers in 2023.

“There is still a lot of risk facing insurers as macroeconomic issues and a potential slowdown loom – conditions which typically lead to an uptick in D&O claims,” said Vanessa Maxwell, global head of financial lines at AGCS.

She said inflation was also likely to influence claims.

Are non-vanilla risk challenges growing?

So for many brokers, the non-vanilla risk challenges continue.

“For all industries, all classes, we’ve seen a reduced appetite in coverage for, not even the worst risks, just those that don’t fit within the box of a vanilla client,” said Di Fiore.

Battle fatigue

The Geelong broker said another big challenge is “simple battle fatigue.”

Di Fiore warned that years of bad market conditions and the work pressures they bring are taking their toll on staff across the insurance industry.

“I think underwriters, brokers and even clients - we’ve all dealt with year on year of bad market conditions,” he said. Di Fiore, like many industry stakeholders, doesn’t see an end to the hard market anytime soon.

“I think that constant battle with hard market conditions - it takes a toll on all of us and the mental well-being of staff is a concern,” he said.

Are you a broker? How are you dealing with non-vanilla risks? What are your main challenges? Please tell us below

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