Insurance – The Year Ahead

Insurance – The Year Ahead

The Insurance Council has today warned New Zealand business that international trends indicate insurance premiums for directors and professionals may continue to rise again in 2003.

Internationally there are indications that insurance premiums for directors and professionals may rise by up to 30% this year and include additional restrictions and higher excesses as a result of terrorism, corporate collapses and weak investment markets.

The Insurance Council’s Chris Ryan said the Insurance Council was issuing this warning to alert New Zealand business to the challenge facing the insurance market in 2003.

International observers believe Professional Indemnity policies are expected to bear the brunt of premium rises and some companies may find it difficult to get all the cover they require.

Chris Ryan said his members are now indicating that while 2003 will be a tough year for Professional Indemnity and Directors and Officers insurance there should not be dramatic change in household and motor vehicle insurance.

Directors and Officers Liability costs rose during 2002 and this trend looks set to continue during 2003. The biggest issue for the insurance market, says Chris Ryan, is a serious lack of capacity. As a consequence insurers are being far more selective about who they insure, and to what extent. Companies’ that are not well run may find it increasingly difficult to obtain previous levels of insurance, or in some cases, insurance for liability issues may be restricted. Insurers’ positions were damaged on a number of fronts in recent years – September 11 and its fallout including the reinsurance market, the collapse of HIH Insurance and Enron in the international markets, and Public Liability crises in Australia and internationally added to already existing issues of poor investment returns from weak global sharemarkets.

Many insurers are now reducing available coverage and some policies now incorporate a longer list of exclusions and restrictions. Some insurers are also significantly increasing excesses. Competition in the international insurance market means insurers are adopting stricter underwriting criteria than they have in the past, Chris Ryan said.

The Insurance Council is again encouraging boards of directors and management to take a close look at the conditions and cover available for liability issues relating to their business.

Chris Ryan says the Insurance Council is confident that while 2003 looks set to be a difficult year, the insurance industry remains strong, sustainable, and capable of returning to strong profitability in coming years.

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