The insurance market faces continued pressure to provide an acceptable profit margin in an environment of increased regulatory and compliance requirements. These are driving costs up, whilst reduced returns are bringing investment income down.
The building and construction industry, including the professions, is facing insurance restrictions because of its high-profile losses and potential systemic shortcomings worldwide. International insurers have taken corrective action to address what they see is a change in risk profile, and this has filtered through to New Zealand. The result is that we are likely to see more restrictions on our professional indemnity insurance in the future.
The impact of climate change is a very real reality, with weather related events, fires, droughts and floods becoming more frequent and forcing overseas insurers and reinsurers to review their catastrophe risk models and reassess the impact that large losses have on their premium pool. This has seen the cost of capacity from off shore insurers and re-insurers go up: meaning that insurance is now more expensive to get and there is less of it available. It has also resulted in larger indemnity limits being less readily available.
What this means for you and the 2019 insurance renewal is that the cost of professional indemnity insurance is going up, and pricing increases will apply.
So far, NZACS members have been spared the coverage exclusions imposed by many other insurers relating to cladding and building defects. But we have to anticipate that cover exclusions may become standard on professional indemnity insurance.
Aon, as the insurance brokers acting for NZACS, will be consulting with insurers during the next twelve months on these developments. We will keep you informed as and when we can.