The Australian insurance market remains profitable but there is a risk that market softness runs ahead of emerging claims experience, warns Hall & Wilcox in its Australian specialty insurance market outlook. 

“Over the next six to 12 months we expect the Australian market to remain profitable in aggregate terms, but the real story will be how individual classes develop,” says the report.

The firm says soft conditions look set to continue, with plentiful capacity and strong competition. 

In financial lines, it expects competitive pressure on clean risks, but a steady flow of claims linked to continuous disclosure, private credit and professional services work. 

Claims frequency in financial lines is down, but severity is up, with inflation, including rising legal costs, a key driver, says Hall & Wilcox partner Bridget Wall. 

The report predicts construction professional indemnity claims will drive frequency over the next 12 – 18 months as latent defect claims emerge and insolvencies prompt claimants to pursue solvent professionals and their insurers. 

Lloyd’s share of the professional indemnity market continues to grow and if pricing continues to soften, it may understate the real risk. 

The cyber market is expanding, with new entrants including agencies backed by the London market. 

There is significant upside as SME take-up is relatively low, but cyber claims are rising steadily, alongside increased third party risk, regulatory enforcement and class-action risk. 

The casualty market is seeing gradual pressure across long-tail classes where psychological injury, abuse claims, workplace conduct and damages inflation can “quietly affect reserves and coverage positions”. 

These trends do not sit neatly inside workers’ compensation but can flow into casualty, management liability, employment practices liability, public liability and directors’ and officers’ programs, says Hall & Wilcox partner John Van de Poll.

Click here to read the full report.