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7 June 2022
Insurers have been looking closely at their portfolios with a view to managing their exposures to individual risks.
Inflation is compounding the situation as revaluations are increasing property sums insured significantly, often by over 20%.
We are seeing some major insurers only prepared to maintain existing capacity when a sum insured increases in Wellington. This means that other insurers will need to be sourced to accept the increase in sum insured. This can be difficult and may result in increased premiums.
Irrespective of the seismic exposure, insurers are carefully reviewing the value of single site exposures for certain risks. In particular this is prevalent where the construction of a building includes expanded polystyrene panel (EPS) or aluminium composite panel (ACP).
Globally both EPS and ACP have been at the centre of large fires that have resulted in major insurance claim settlements.
In New Zealand to date, EPS has been more of a concern than ACP but we are now seeing insurers look closely at ACP buildings. With both EPS and ACP, it is vital that time is taken to demonstrate to potential insurance providers that there are solid risk management procedures in place.
Capacity is also an issue in some areas of the liability market. In the past insurers tended to individually take on large limits of indemnity on risks such as directors and officers liability and professional indemnity. Often an individual insurer would commit capacity of $30m or more to a single risk.
However, both the increase in litigation and the higher costs of defence have led insurance companies to review their positions and attempt to mitigate their exposure by committing less capacity to each risk. This can lead to the need to find additional insurance support from other insurers which can take more time and sometimes lead to increased premiums.
Talk to your broker if you have any questions about your cover.