The market is expected to grow between 4% and 5% in 2019, despite an increase in economic headwinds (falling residential property prices, declining new car sales and the fallout from the US-China trade war). High catastrophe losses from the December 2018 Sydney hailstorm and the February 2019 Townsville floods will justify a further 5% average increase in household premiums.
Commercial/industrial property and Contractors’ All Risk (CAR) rates are rising at a faster pace in 2019 than in 2018 and will probably continue rising into 2020 until previous soft-market reductions have been completely reversed.
Falling rates in the South Australia and New South Wales compulsory third party (CTP) markets will stabilise. Rates for comprehensive motor and commercial vehicle will continue to push upwards. Although their contribution to overall market growth is small, rates for corporate Directors and Officers Liability (D&O) and construction-related professional indemnity will continue to surge.
The appalling loss experience of the D&O market seems to be the most serious insurance issue for the functioning of the Australian economy, as well as what seems to be systemic problems with design and construction standards across the building industry. Because of huge class action settlements achieved with the help of commercial litigation funders, D&O premiums are rising by up to 100% a year and an increasing number of corporations either cannot achieve the capacity they need or cannot find insurance at all.
Because of claims for replacing flammable aluminium composite panels (ACP) in high-rise buildings and other more serious construction defects, construction professionals can no longer buy exclusion-free PI policies and design liability cover is being withdrawn from CAR policies.
Although Australia is only the ninth-largest non-life market in the world, it has a complexity and interest that rivals that of the US. Because of its federal structure comprising eight states and territories plus the commonwealth government, Australia has nine workers' compensation systems and eight systems for compulsory motor third party.
Australia also has a highly evolved common law legal system, massive gas and mining industries and a moderate-to-severe exposure to every natural peril.
The country was a pioneer of risk-based capital and prudential supervision of insurers and is now a front-runner in the field of insurance consumer protection.
Although the market is well-penetrated by branches and subsidiaries of multinational insurance groups, more than two-thirds of premiums are still written by three domestic insurance groups (IAG, Suncorp and QBE). The first two groups are large and sophisticated users of quota share reinsurance for capital management purposes.
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