Broker says insurers braced for "flood" of insolvency claims

Broker says insurers braced for "flood" of insolvency claims | Insurance Business New Zealand

Broker says insurers braced for "flood" of insolvency claims

With government support measures such as the wage subsidy coming to an end this year, the risk of insolvencies will increase – and, according to National Credit Insurance Brokers (NCI)’s Phil Ashby, this is already bad news for businesses wanting to insure against bad debt.

Ashby said that the insurance markets had been “very challenging” over the past year, with insurers reluctant to write new business and approve renewals, despite the fact that Australia and New Zealand’s statistics were far from dire. He said insurers were expecting to see a “flood of claims” come through in 2021, and that this is already leading to a rise in premium costs.

“The insurance market has been very challenging for us, because a lot of the insurers naturally look at things from a global perspective in terms of how many companies are going broke,” Ashby told Insurance Business.

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“In Australia and New Zealand, we’re not seeing a huge increase in claims at this stage, which is contrary to what the insurers expected to happen. That’s not saying that it won’t happen in the future, but at the moment our stats are saying that it’s been a better year than 2019.”

“However, we’ve had to negotiate a lot harder with the insurers to get renewals done and to get new business in place, and also to get the cover that our customers need on their individual buyers,” Ashby explained.

“It’s been a lot more work to get the cover that we’ve had in the past, and, as we go into the new year, the assistance that the government has put in place like the wage subsidy comes off, and we may start to see those insolvencies start to come through. We may have to gear up for an increase in claims.”

Ashby said that insurers were increasing their prices even on ‘clean’ policies with no claims history, which was in line with an overall rise in insurance costs around the world. He said some industries had also dropped off the table completely, and were likely to remain uninsurable for some time.

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“Just as the cost of insurance around the world goes up, we’re definitely seeing pressure in some industries where insurers are either not willing to quote on new business, or not willing to renew,” Ashby said.

“There are some markets which are clearly high-risk at the moment, and that’s mostly around tourism and airlines.”

“We’re definitely seeing pressure on premium rates going forward, but some of our clients in New Zealand are actually seeing booming times and are collecting their debts faster than they did before COVID,” he added.

“But the insurers are seeing increased claims coming, so they’re taking a conservative approach.”