Insurance firms in both Australia and New Zealand face a global market that is softening for some lines – including cyber and directors and officers (D&O) – but still a hard place for others. A relatively light year for natural catastrophes has allowed some local insurance firms to reap strong profits, fuelled largely by premium hikes. However, despite a positive 2024 for many insurers, 2025 looks uncertain.
Delta Insurance Group, an underwriting agency, has operations in both Australia and New Zealand. Insurance Business asked CEO Kent Chaplin (pictured above), what’s going on?
“D&O is experiencing a global decline in premiums due to more competition, low losses, and adverse macroeconomic conditions,” said Auckland-based Chaplin. “We expect this trend to continue for the next few years.”
He said the cyber market is more volatile than D&O but has also seen premiums decrease.
“This is due to increased competition after two years of profitability,” said Chaplin. “However, we are seeing recent reports showing increased cyber-attacks compared to the first two quarters of the year, as well as an increase in the severity and sophistication of attacks.”
If this increases the number of claims, it could, he suggested, increase volatility and push premiums back up.
Chaplin said his trans-Tasman insurance business currently faces many insurance market uncertainties.
“Navigating our way around these will continue to be a challenge over the next few years,” he said. “Continued global political instability, financial market volatility, ongoing climate risk and emerging technologies mean ongoing risk in various sectors of the economy.”
Chaplin said insureds are also expecting more from their insurer including a deeper understanding of the risks.
One answer to these challenges is artificial intelligence (AI).
“We are embracing emerging technologies like AI to enable our underwriting and claims teams to make informed decisions faster,” he said. “While navigating uncharted waters can be challenging, we are committed to leading the pack and leading this space.”
In fact, some industry stakeholders in New Zealand would like the government to be more proactive in the AI space and – much like Australia – bring in more regulatory guidance.
However, Chaplin isn’t too concerned.
“We’re not waiting for the government to set regulations,” he said.
He said some guiding principles would be helpful for the industry but suggested that, like everyone else, the government is still grappling with AI.
Last week, in its annual Global Insurance Market Report (GIMAR) for 2024, one of the world’s leading insurance organisations was positive about the last 12 months.
“Insurers maintained stable solvency and profitability levels, supported by strong underwriting performance and robust investment returns,” the report said.
However, the International Association of Insurance Supervisors (IAIS) warned that the year ahead may not be so bright.
“Uncertainty, however, remains, with geopolitical tensions posing risks to the global economic landscape, and digitalisation and artificial intelligence offering benefits, yet also posing liquidity and cyber risks.”
Aon’s Q3 2024 Global Insurance Market Overview, released in October, struck a similar tone.
“Healthy insurer returns and improved reinsurance conditions have continued to restore insurer confidence and growth appetite, helping to drive competition,” said the authors.
They also warned of challenges ahead.
“U.S. Casualty exposures remain a top underwriting priority and pricing concern globally, as the effects of social inflation continue to impact insurer profitability,” the report said.
In November, McKinsey & Co published its Global Insurance Report examining 2025’s likely trends based on insurers’ performance during 2024.
“Global commercial P&C insurance lines continued to deliver strong growth despite more recent evidence of softening conditions,” the report said. “Premiums increased by an average of 8 percent annually in the past five years.”
The authors warned that ”Almost all of this growth was driven by higher premiums” and suggested that now insurers should focus on how to be profitable in other ways in a “shifting landscape”.
In a recent interview with Insurance Business, Scott Eccleston, head of Global Placement for Marsh in the Pacific Region, summed up this shifting market picture:
“The insurance market is transitioning between hard to soft,” said Melbourne-based Eccleston. “I would classify it as multi-speed.”
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