The cost of living in Australia continues to skyrocket, with inflation having secondary impacts on the commercial property insurance industry, according to broking giant Gallagher.
In its Business Insurance & Risk Market Update H1 2023 report, Gallagher explored key trends putting many Australian businesses at risk and other considerations regarding commercial property insurance.
“The cost of repairs and replacement is increasing due to the effects of inflation on building materials and labour, both of which are in short supply due to other market forces, including the disruption to migration flows caused by COVID-19 and to supply chains due to both COVID-19 and the Russia-Ukraine war,” Gallagher said.
“Hard-market conditions continue; however, there is good evidence that the steep pressures over the past two years are levelling out, with premiums as investments in risk management pay off and insurers return to profitability. However, for some higher-risk industries, conditions remain tight,” said Mark Oatway, managing director (placement) at Gallagher.
“Geopolitical risks, such as the Russia-Ukraine war, economic instability with rising inflation, stretched supply chains and materials and skills shortages, and the impact of natural catastrophes all loom as perils that could create further market volatility.
“Inflation, in particular, is having a significant impact as the risk of underinsurance in the property market rises and making updated valuations essential for all businesses.”
According to the report, key trends and other considerations regarding the commercial property insurance industry include the following:
The report also delved into the following:
“Insurance has always been designed to protect against unforeseeable events. If businesses know they have vulnerabilities, they should quickly address these issues before seeking cover,” Oatway said.
“Taking an individual approach to appropriate risk transfer arrangement for each business is required and, in some cases, this may mean thinking beyond the traditional insurance market and considering innovative solutions, such as captives and protected cell companies.”