What’s changed in the financial lines market?
What’s changed in the financial lines market? | Insurance Business Australia
Professionals Risks
What’s changed in the financial lines market?
“Australia has seen considerable change,” says expert
Professionals Risks
By
Daniel Wood
“The financial lines market in Australia has seen considerable change over the last five years,” said Robert Barnum (pictured above).
Barnum, who is underwriter for professional lines in Australia and the Asia-Pacific for Canopius Group, said this is particularly evident across financial services and construction for professional indemnity.
He said increased government scrutiny, changes in regulation, increased litigation and capacity have all played a role in this transformation.
Growth across professional services
“We are seeing considerable growth for financial lines in the SME market especially in professional services sectors such as IT, consulting, accountancy and engineering,” said Barnum. “These sectors are all driving strong demand compared to previous years.”
This month, Barnum accepted a role at Canopius, the global specialty re/insurer. The position brings him back to Sydney after a nearly a decade in Singapore with AXIS Capital and before that XL Caitlin.
He said his new firm’s move to bolster its underwriting presence in Australia signals the need to carefully consider each country’s differing financial lines markets.
“Australia has seen an increase in litigation compared to other parts of Asia-Pacific which is one reason it is important to build local underwriting strategies in each market,” said Barnum.
Country differences
He said each country has unique challenges and opportunities and “macro environments”.
“In short, if an insurer wants to succeed in financial lines across the region, it needs to consider each country independently,” said Barnum.
Regulations drive financial lines demand
Barnum said a “detailed analysis” by Canopius showed increased demand for professional lines products in Australia. However, he said recent increases and changes in regulations have presented both challenges and opportunities for the financial lines market.
“With the increased regulatory requirement for professional indemnity, we believe this will continue to drive demand for strong security providers like Canopius that offer robust local claims management, risk assessment and compliance,” said Barnum.
Technology is also creating challenges in the professional lines space. For example, he said, evolving risks due to technological advancements.
“Particularly in regard to cyber exposure where insurers need to continually stay on top of coverage and policy language,” said Barnum. “These issues can lead to pricing and profitability pressures that are another challenge.”
Underwriters, he said, also need to be mindful of increased customer expectations.
“Underwriters must ensure they offer first class coverage and service as well as excellent digital experiences to stay competitive,” said Barnum.
Market comparison: Singapore versus Australia
The Canopius underwriter said Singapore is “a world class insurance and reinsurance market” that brings together people and cultures from across the globe.”
However, he said Australia’s insurance market is “sometimes viewed” as more mature with higher penetration rates and a more diverse range of products and distribution channels, including underwriting agencies.
Singapore and Australia, he said, are both considered global insurtech hubs and are also collaborating on digital innovation “at a rapid rate.”
Barnum described Singapore as “an immensely collaborative workplace.”
“In addition,” he said. “It’s a fast-paced, dynamic environment that’s constantly evolving with new tailored products for local markets like Vietnam or Thailand and I found this very rewarding.”
However, he’s glad to be back in Sydney.
“I am working with a highly experienced team of insurance professionals and at the same getting to start something innovative and new,” said Barnum. “It was definitely an opportunity I couldn’t turn down!”
Other financial lines challenges
According to online sources, some other related challenges faced by underwriters in Australia’s financial lines sector in recent years include:
Claims inflation
Rising interest rates have contributed to higher claims costs
Market Competition
Some industry sources refer to “intense competition among insurers for market share” that can lead to pricing pressures.
Environmental, Social, and Governance (ESG)
Insurers are facing more challenges related to underwriting risks associated with ESG practices at insured entities.
Singapore’s increased regulation
Singapore’s parliament is currently considering stronger financial services regulations that would likely impact the insurance industry. The Financial Institutions (Miscellaneous Amendments) Bill 2024 (FIMA Bill) was introduced to parliament by the Deputy Prime Minister earlier this month.
The Bill’s focus includes enhancing the Monetary Authority of Singapore’s (MAS) supervisory, inspection and investigative powers.
How do you see the financial lines market in Australia? As an insurance professional, what challenges and opportunities are you facing? Please tell us below.
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