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Hard market, pandemic increasing challenges: Gallagher

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Hard market conditions and the impacts of the coronavirus outbreak are presenting challenges for businesses seeking renewed or expanded insurance cover, Gallagher says in a fourth quarter report.

Losses, largely driven by recent natural catastrophe claims, lack of investment returns, higher costs from the treaty reinsurance market and increased litigation are among key issues affecting the availability of cover.

“COVID-19 implications and constraints on key insurance market operators, such as Lloyd’s of London, have had a significant impact on turnaround times for terms offered by overseas insurers,” Gallagher says.

Accountability pressures from shareholders are also making obtaining insurance cover more difficult in sectors engaged in activities with environmental impacts, such as mining and coal-based energy.

Property premium rates are typically priced 10% higher for lower risk renewals and significantly higher for more challenging risk types.

Public liability cover is also subject to increases of at least 10%, irrespective of claims activity or turnover increases.

Risk areas include high bushfire exposure, high worker-to-worker exposure, amusement rides that lift and spin, trampoline and inflatables entertainment centres, coal risks and tailing dams, and buildings with aluminium composite panels.

“On a primary basis, insurers are looking to exclude COVID-19 transmission risks, making expertise in market selection crucial to obtaining appropriate cover for an organisation,” the report says.

Gallagher highlights that an economic downturn and uncertainty also makes risks more acute in professional indemnity, which is seen as a “recessionary-prone” class.

“There can be no room for error or expectation gaps at times when there is pressure on revenue and costs,” it says. “This is when the results of professional services tend to be more heavily litigated.”

Gallagher says insureds should build a strong relationship with their broker, start renewal preparations early, be prepared to provide detailed information and be open to changes in the way programs are constructed.