Global broker reveals NZ insights
Brokers must prepare well ahead for renewal negotiations and explain and sell the insured risks effectively to underwriters in the climate of growing competition in the corporate property space, is the message from Aon’s latest Insurance Market Update for New Zealand.
Aon predicts that while pricing will continue to soften, the restrictions in policy extensions and tightening of policy conditions, particularly in the area of natural disaster insurance for both property and business interruption, are likely to remain.
“We do not see any change in the immediate future with the exception of natural disaster excess reductions in some areas,” the report says.
“Quality risk information, demonstrating a commitment to risk management and negotiating renewals in a timely fashion, is the key to ensuring optimal terms,” the report states.
Increases in earthquake insurance premiums are beginning to taper off with renewed interest from both local and overseas insurers resulting in an increasingly competitive corporate property insurance market, says the report.
However, obtaining natural disaster cover for earthquake prone buildings and buildings noted as at risk by councils from earthquake or natural disaster damage remains difficult.
“Increasingly, buildings with these exposures are being covered by underwriting facilities, with underwriting capacity usually being provided by various Lloyds of London syndicates and distributed through insurance brokers, including Aon,” it said.
In regards to general liability, the report states the market is relatively stable however rates in primary and excess liability are increasingly competitive with capacity remaining plentiful.
“Differentiation, risk management and claims mitigation pre and post loss, remain the main controls for clients. The ability to fund meaningful deductibles can also be rewarding.”
The Steigrad court ruling is likely to impact on policy design and structure going forward.
Increased fines and penalities arising from the new Health and Safety Reform Bill (in force 1 April 2015) mean policies need to be reviewed with good risk management processes demonstrated to underwriters to ensure competitive terms and pricing.
For D&O liability the market has remained reasonably soft for an extended period with flat rates.
There is growing capacity in New Zealand and overseas markets, with corporate underwriters increasingly willing to broaden coverage rather than reduce premiums, despite rising claims frequency and severity.
Managing director of broking and chief broking officer, Pacific Aon Risk Services James Baum said there is a growing tendency for legal costs to outweigh the settlement amounts, forcing insureds to consider if they need to increase limits.
“The market and insureds alike continue to monitor the impact of the Bridgecorp decision in New Zealand, including the potential impacts the case may have on Australian directors’ ability to access proceeds to fund their defences.”
In the professional indemnity sphere, leaky building issues continue to cause concerns, with even some of the remedial work being problematic, the report states.
“Consequently there is limited capacity available for engineers and architects and for those engaged in building work generally.”