Edition 12/2001
Surely
Things Can Only Get Better
Every
sport and recreation administrator in Australia is well and truly
aware of the current situation of dramatic increases in insurance
costs, or even in some instances the impossibility of obtaining cover.
Previous editions of the IEA Sport Monthly Update have referred
to this and put forward factors that have contributed to the
situation. Various
parties, including government bodies, are seeking means of addressing
the problem. Such is the seriousness of the situation one could think,
“surely things can only get better”.
Well,
I hate to break it to you, but indications are that is not the case.
I
refer in particular to an article titled “Capacity Crunch” in the
December – January 2002 edition of the “Insurance and Risk
Professional”, a magazine published by the National Insurance
Brokers Association. This
article is not referring to insurance for the sport and recreation
industries in particular, but insurance across the board.
Under the sub-heading of “Underwriters abandon tougher risks,
and rates are heading up again”, the opening paragraph reads, “The
Australian insurance industry is facing a capacity crisis with rates
skyrocketing and many medium-grade risks unable to obtain cover.
Rates are expected to climb dramatically in the January 1
renewals, and intermediaries are warning that the underwriters are
avoiding exposure to any kind of difficult risk.”
The second paragraph continues with, “Rates for
high-exposure risks are expected to increase by up to 100 per cent
over the next year, on top of an average 50 per cent rise experienced
this year.”
I
know that is not the news we all wanted to hear.
|
|
Experiences
suggest that Australian insurers are refusing to cover all but
relatively easy risks and the main alternative for liability risks –
Lloyds of London – is also cutting it’s exposure to the Australian
market. The re-insurers, who usually have their rates for the next
year sorted out by mid-October, are understood to have held back until
mid-November while they assessed the state of the market and now capacity
problems seem to be an obstacle.
Although
rate rises were already coming into effect in a hardening market, the
impact of the World Trade Centre terrorist attacks have allegedly been
the catalyst for the industry’s sudden imposition of massive rises.
However, even companies with minimal or no exposure to the WTC
disaster are taking a hard-nosed attitude to renewals.
Cover for one-day events such as sports meetings, school fetes
and the like that previously attracted premiums in the vicinity of
$250 to $350 generally now cost somewhere around $2,000.
The organisations concerned often don’t have that sort of
money and the risk is that they will go ahead without cover.
Traditionally
Australian insurance rates have been at a discount in comparison to
the international market. This
situation no longer applies and it is the international rate that is now
being charged. However some
higher-risk exposures will simply be unable to obtain cover at any
price. Underwriters at
Lloyd’s are now saying they cannot insure some clients, and that’s
that.
The
challenge for the Australian insurance market will be to ensure that
all available capacity does not sit at the low-risk end of the market.
Rates will continue to rise, and over the next 12 months
governments are likely to take a much closer interest in the insurance
industry and its impact on the lives of practically every Australian.
Continued
....
|
