In the main, conditions in financial lines remain favourable for buyers. However, there are pockets of hardening and signs that insurers are becoming more selective.
Financial institutions in Australia – currently subject to a Royal Commission inquiry into misconduct – face significant challenges in purchasing financial lines cover and material changes to terms and conditions.
Following a number of large losses – QBE settled a shareholder class action for AU$132.5 million in January 2018 – the Australian financial lines market has hardened significantly throughout 2018, and is likely to do so further into 2019.
This hardening is most pronounced in directors and officers (D&O) insurance for publicly listed companies and professional indemnity (PI) for financial services companies and certain professions.
Increases in excess of 100 per cent have become more common, deductibles have generally increased, and limits and coverage are being restricted.
Anticipating this change in market sentiment, JLT was able to secure capacity for its Australian clients in London, helping to mitigate some of the worst increases.
This has resulted in a 400 per cent increase in Australian D&O business flowing into London.
Globally, PI rates are also subject to upwards pressure, albeit with some variation by profession and region.
Commercial crime is another area facing higher premiums and restrictions in coverage, although concern for cyber and fraud has led to a trend for buying broader forms of commercial crime.
Interest in cyber insurance more widely continues to grow and, despite losses in the market, pricing has remained stable.
We would expect the financial lines market to become more challenging in 2019 and into 2020.
Such conditions will require an intermediary that can think strategically and exploit inconsistencies which exist between markets.
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