The Australian property insurance market has continued to soften. Brokers say that, in recent months, insurers have been able to offer discounts on a wide range of commercial property premiums.
“We're finding that the property market, in particular, has really turned a big corner,” said Adam Richardson (pictured).
In a recent interview with Insurance Business, the Melbourne-based broker said, compared to six or seven years ago, there are now more insurers competing for business.
“I think it's a really good opportunity for consumers at the moment because the market has softened in the last couple of years which means that capacity is becoming a lot more available from insurers,” he said.
Richardson is Bellrock’s practice leader with 20 years’ experience in the sector, including special risk corporate property programs and shopping centres.
“For instance, if one of our customers has a billion dollars of assets, you may have found that about seven years ago there might have been only three or four insurers that could possibly compete for assets of that type of size,” said Richardson.
He said the drivers of the change likely include stabilising and slowly falling interest rates. However, Richardson said the cost of capital is still high and inflation “is thereabouts.”
“We’re finding that it's a buyer's market at the moment for consumers,” he said.
Insurance Business asked if it’s a buyers’ market for brokers’ smaller commercial customers too or only the big corporate players?
“I’d say almost for everyone really,” said Richardson.
He said if brokers are suggesting that a rate increase of 5% is a good deal on a property premium, those customers “need to go and speak to someone else” because their broker isn’t advocating for them strongly enough.
“They [property sector customers] should really be getting discounts and be getting good news,” said Richardson.
However, he said some familiar challenges would stop discounts being applied in some cases.
“Provided they haven't had losses and provided these assets aren’t in low lying cat loss areas, like flood zones for instance,” said Richardson, “it’s [selling commercial property insurance] attractive business for insurers at the moment.”
His firm recently released a market update for the property sector.
“Since our July 2024 market update, there is a continued softening of premiums for commercial property insurance policyholders who have sound risk management strategies and no claims,” said the January report.
The report said policyholders who have adopted strategies to mitigate loss could see rate reductions of about 5% on average. The update said insurers are also offering “improved policy conditions” to incentivise customers to grow their property portfolios.
“Premium rate reductions follow some softening of the catastrophe reinsurance markets,” said the report. Reinsurance markets are generally softening, said the update, “due to higher investment returns and some consolidations in the market, causing an excess of reinsurance capacity.”
Despite the increased capacity and a softening market, reports show that underinsured properties, both commercial and residential, are a major issue. A recent Gallagher report also said insurers are less willing than in previous years to cover high-risk properties.
The report showed that many Australian businesses are confronting new obstacles in securing comprehensive commercial property insurance coverage caused by inflationary pressures, rising rebuilding costs and an uptick in extreme weather incidents.
These factors have contributed to larger claim volumes, said the Gallagher report, pushing insurers to adopt stricter underwriting standards and reduce their willingness to cover higher-risk properties.
Gallagher said that rapid inflation has driven up property and asset values across Australia, leaving many existing coverage limits inadequate.
Some stakeholders have also drawn attention to underinsurance concerns in the wake of ex-Tropical Cyclone Alfred.
In news reports, Marty Sadlier, director of MCG Quantity Surveyors, warned that homeowners were at risk of financial crisis if they sustained damage from this nat cat. Sadlier said many Australians have underinsured their homes to cut costs for many years.
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