Publication – September 27, 2021 – Insurance Market Outlook Q3 2021

news & insights


We recommend that consideration is given to urgently reviewing your current insurance arrangements as it is essential that cover is updated in conjunction with changes in risk profile.

September 27 2021

Insurance Market Outlook – Q3 2021

Quarterly General Insurance Performance Statistics – June 2021¹

In Australia the General Insurance Market is principally regulated by the Australian Prudential Regulation Authority (APRA), which monitors and reports on the General Insurance Performance each quarter. This reporting provides useful insights into the insurance market including its profitability and sustainability which ultimately impacts the premiums able to be offered to insureds.

In August 2021 APRA released its report with respect to the industry’s performance for the Quarter Ending June 2021 (QTR June 21). From this data we note that the Australian General Insurance industry reported a net profit after tax of $1 billion for the year ended June 2021, being an increase of $0.1 billion by comparison to the year ended June 2020. While positive underwriting results were reported, being an uplift of 17.6%, these were constrained by insurers provisioning for COVID-19 related Business Interruption claims, continued natural catastrophe claims payments and market volatility impacting investment returns (which while up were nowhere near pre-COVID-19 returns).

From a class on class comparison Householder, Domestic Motor, Industrial Special Risks and Professional Indemnity classes reported higher gross earned premiums by comparison to the year prior. In relation to claims, Gross Incurred Claims payments remained at similar levels for the year ended June 2021, by comparison to June 2020. Significant drivers include continued effects form the 2020 Halloween Hail Storm, NSW and QLD flood events and provisioning for COVID-19 BI claims; however, this was partially offset by markedly lower motor vehicle claims due to decreased vehicle usage as a result of lockdowns.

The driving factors for the Australian General Insurance Industry’s QTR June 2021 net profit after tax have been the lower gross incurred claims expenses, higher underwriting result and significantly higher return on investment. As will be demonstrated this stronger result by insurers has translated to a deceleration by insurers of premium increases (see ‘Classes of Insurance’ Section).

Furthermore Chart 1 and Chart 2 (below), extracted from the APRA June 2021 results, demonstrate that while insurer profitability has been dramatically reducing since 2018, the market is beginning to demonstrate early green shoots of returning to profitability.

While this deceleration of insurer unprofitability is a promising first step to returning to soft market conditions, we estimate that the hardening market will continue for at least a further 18 to 24 months.

Classes of Insurance² 

While positive signs are visible in each major class of insurance, it must be noted that these are only very early green shoots, whereby the potential of a large catastrophe or other such event would easily impact insurers’ profitability. While that can be said insurer capacity is slowly returning to the market in certain classes and with appetites expanding in certain classes one can take a view of cautious optimism.

The charts below graphically demonstrates the Australian General Insurance Market Pricing quarter on quarter for Property, Casualty and Financial Lines (D&O, PI, Cyber).

Globally market trends were up 15% in the QTR June 2021, which whilst demonstrating the 15th consecutive quarter of pricing increases also shows a continued deceleration of those increases since Q1 2021. This has principally been driven by moderation in global property and D&O pricing increases. The below chart graphically represents the global general insurance pricing trends.

The Outlook – Major Classes

Property / Industrial Special Risks Insurance

While the QTR June 2021 period reflects the 15th consecutive quarter of property insurance premium increases in the Australian Market, the 14% uplift noted in this period reflects a marked deceleration. Notably this has resulted in a return to the market by some insurers/syndicates with additional capacity available for client’s with good loss records. Notwithstanding the current market environment still does present challenges to those clients in high-hazard industries, CAT exposed or with poor loss records. Similarly Lloyd’s of London reports similar results, with a 15% uplift reported for the QTR June 2021 but also faces similar challenges to the Australian market. Despite this the messaging remains the same in that the increases in pricing to the property insurance market are clearly decelerating; however, we caveat this as being only very early signs and predict the hardening market will remain for another 18 to 24 months.

Financial Lines / D&O

It is reported that pricing increases in the London D&O market has largely dissipated through markets completing their portfolio remediation.[3]

Additionally this has been facilitated by fresh capacity entering the London Market, including Rising Edge, Tegron Specialty and IQUW leading to more competition in the market. However the London Markets report that the potential for insolvency driven litigation resulting from the fall-out of COVID-19 remains the markets leading challenge with some even predicting this will preclude the markets return to profitability. Currently pricing increases are reported at 10% in the London Market.

In Australia QTR June 2021 pricing increased by 37%, down from 48% and 51% in the preceding quarters. In Australia, these results were largely driven by the levelling out of D&O pricing due to additional excess capacity insurers entering the market.

Additionally amendments to the Corporations Act 2001 (Cth) will seek to raise the threshold by which to bring class action claims by shareholders against directors and officers. By virtue of these amendments directors and officers will only be civilly liable for failures to disclose market sensitive information when they knew, were negligent or reckless as to whether that information would materially affect the share price. This is a higher bar for class action lawyers to demonstrate, and should dissuade vexatious litigation potentially reducing the prevalence of class action activity and benefit insureds.

It is expected that in time availability of affordable D&O cover, including Side C coverage will improve. However, we anticipate that insurers are likely to be cautious to accept that there will be a reduction in class actions and that prior to ceasing remedial action insurers will likely require a tangible decline in shareholder class action claims and costs.

Professional Indemnity

Professional Indemnity continues to be a significantly challenged insurance market globally. In QTR June 2021 pricing increases in the order of 20% to 30% were experienced on clean risks with some insurers commenting that their pricing increases were in the order of 50% based on clean risks and 100% + on poorer risks. While this still reflects a pricing increase it must still be mentioned that the increase has decelerated from June 2020 whereby increases in the order of 30% were observed on clean risks and 150% + on poorer risks. While the effects of the market are different in each industry sector, a common factor is the increase in social inflation led by litigation funding, increase in class action claims, a hyperactive regulatory environment and increase in litigation rates. Specific industries which remain challenged in the current professional indemnity landscape include:

  1. Engineering, especially structural, geotechnical and design and construct whereby very little capacity remains in the market. On a similar note certifiers and valuers continue to experience difficulties with very little appetite remaining in the market for those occupations;
  2. Accountants, particularly those who provide auditing services for listed entities, M&A services and financial institutions have experienced appetite and capacity withdrawals, with those markets willing to participate increasing pricing greatly;
  3. Financial Planners, who continue to see markets withdraw from writing business in this space and blanket exclusions on core components of business such as MDAs;
  4. Lawyers whereby the professional indemnity market continues to experience significant and frequent claims. As a result less capacity, at a higher cost, is available in the market due to insurers continuing to remediate their books to stay sustainable.


Cyber Insurance perhaps was the most surprising with London and Australian insurers alike reporting significant uplift in pricing, in what has previously been a relatively stable market. Pricing increases in this sector was reported at approximately 35% to 40%, largely being driven by increase in ransomware claims (which now accounts for 75% of all claims in this sector), deterioration of loss histories and large high-profile global claims, such as the Colonial Pipeline Ransomware attack. Notably the Australian Cyber Security Centre received almost 68,000 cyber crime reports in FY21 with self reported losses in excess of $33 billion, demonstrating a dramatic proliferation in cyber crime. As a result insurers have also placed significant scrutiny on availability of limits with line sizes down to between $5 million and $10 million and significantly reduced limits of ransomware and social engineering claims.

Casualty (Liability)

Casualty markets in Australia experienced an 18% uplift in pricing for the QTR June 2021 being the single largest increase for 17 consecutive quarters. This is largely a result of systemic issues in the space such as increased litigation rates, increased social inflation such as with medical costs, plaintiff friendly judges and third party litigation funding. Inherently this impacts the frequency and severity of claims in the casualty space placing increased pressure on insurers.

In addition and in order to minimise exposure primary insurers have been reducing their line size and in doing so have placed pressure on excess lines resulting in pricing increases. This has since developed further with restructuring of major programs by insurers due to underwriters changing appetites in excess layers.

Fortunately these pricing increases weren’t so pronounced in the London market with increases in the order of 7% reported. However London insurers still maintained a cautious approach to renewals through applying scrutiny of policy terms and conditions and the application of additional exclusions for disease and cyber losses.

Allegiant IRS – Our Approach

Clients in the current market conditions continue to face significant challenges in all facets from pricing, deductibles, capacity and coverage terms and conditions. It is therefore critical for clients that as insurers continue to remediate their portfolios focus remains on maintaining suitable coverage. Ultimately this is more pronounced as clients’ will want to be assured their cover remains in tact by virtue that they are paying more premium.

Allegiant IRS, through its demonstrated experience and collaborative approach with McCullough Robertson Lawyers, excels at ensuring the right cover is implemented for our clients with the right insurer. Each and every insurance program is reviewed both before and after placement by the Insurance Practice at McCullough Robertson providing clients with an additional level of assurance. Furthermore through our detailed, A-Class submissions to the market we ensure that our clients’ insurers thoroughly understand our clients risks and therefore achieving competitive premiums with no surprises at claims time.

As the insurance market continues in its hardening cycle for those particularly challenged industry sectors, we also have demonstrated capabilities at developing non-traditional insurance models, with a view of providing clients with a future-proofed solution, immune to the traditional insurance market ebbs and flows.

An unfortunate by-product of the hardening insurance market too is the inflated remuneration received by traditional broking houses through commissions, overriders and other hidden kick-backs which are intrinsically linked and loaded onto premiums. Allegiant IRS proudly, do not accept any commissions or otherwise from any insurer whatsoever, whereby our remuneration is by way of a transparent fee for service, commensurate with the level of work involved, agreed to in advance.

We welcome to you speak with one of Allegiant IRS’s trusted advisors about your insurance needs and how we may be able to assist you.


¹APRA General Insurance Statistics – QTR June 2021

²Marsh Global Insurance Index Q2 2021

[3] BMS London Market Overview July 2021; AON Professional Indemnity Insurance Market 2021.

Key contacts

Brad Russell

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Cormack Hankinson
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