Personal liability rates set to rise

By Nick Stride

Friday 23rd November 2001

Directors' and company officers' liability insurance premiums are set to rise by up to 50%, according to international insurance consultants Willis Group.

The group's 2001 insurance market overview says premiums are rising across the world and across insurance sectors.

This was not only as a result of the September 11 terrorist attacks and the US' war on terrorism but also because markets had been soft for several years.

Demand for insurance of all types had been increasing while supply is shrinking.

The Willis report said the highest rise were expected in the New Zealand aviation and energy sectors.

Air New Zealand has already had to call in the government to provide cover for its aircraft after its insurers slashed cover, threatening services to destinations such as Europe where full cover is mandatory.

Worldwide, the energy utility sector had experienced almost four years of unprofitable underwriting and reinsurers were looking for higher prices as they sought to spread World Trade Center property losses across other insurance lines.

Premium rises could also be expected for professional indemnity insurance as demand continued to rise.

"Historically a deteriorating global economy has tended to foreshadow increased litigation as commercial organisations moved to recover losses, holding other parties responsible where possible," the consultants said.

Insurance for financial institutions was in an "extremely unfriendly environment" as rates increased dramatically across the board, in some cases over 100%.

Willis said insurance capital would be made available only for those risks and clients which insurers felt comfortable with and informed about.

Its advice to corporates was to cover core operations, to retain more risk themselves where it made sense to do so, and to "burnish the image of their organisation" and highlight those attributes that distinguished them from competitors and others.

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