Australian commercial insurance premiums are forecast to rise 6% next year after increasing 7.4% in the current 12 months as a rate-hardening trend continues and the economy expands, Swiss Re Institute says.
“Solid economic growth this year and next will further underpin demand for insurance,” Swiss Re Group Chief Economist Jerome Jean Haegeli says in a report on the Australian commercial insurance market issued this afternoon.
Commercial motor is forecast to rise 10.3% this year and 5.5% next year, while property is expected to increase 4.1% this year and then 6%.
In liability, financial lines, especially directors’ and officers’ covers, are facing sharp increases due to class action activity, while capacity constraints are also contributing.
The expected rises follow gains of 4.3% last year as the impact of natural catastrophes, including Cyclone Debbie, helped drive the market.
Swiss Re Corporate Solutions Head of Sales ANZ Stephen Higginson says gains are not across the board, with wide variations within various lines.
He says the market is still making up ground after more than a decade of difficult conditions.
The insurance community allowed the pricing levels to drop too low, he told insuranceNEWS.com.au. But underwriting approaches and strategies have changed.
“We are still in a position where the insurance community needs to see at least another year of sensible rating and a sensible approach to risk to say we have got over the worst of it,” he said.
“But it is a lot better than having a market that continues in free-fall.”
Marine insurance remains a soft area, with no increase expected for this year and just a 1% rise forecast for next year, while the outlook is also clouded by the potential impact from escalating US-China trade concerns.
Australia’s commercial insurance market was estimated last year at $US10 billion ($13.8 billion) by direct premiums written, making it the 10th largest in the world, the report says.
Longer term, business interruption risk will be a growth driver as many companies in Australia, particularly SMEs, don’t have cover in place.