2024 was a year globally defined by conflict. For 2025, with geopolitical tensions showing little sign of abating, how governments and regulators handle matters as they arise will likely play a crucial role in shaping the claims environment.

The impact of sanctions, energy price disruptions, regulatory shifts, and the broader consequences of global conflict and volatility are expected to significantly influence various business lines.

AI is quickly changing the insurance industry, making processes faster and more efficient, but it also brings new risks for claims. Alongside this, more frequent extreme weather events, economic struggles like higher insolvencies, and rising activist claims and ESG-related regulations are creating a tough environment for insurers. They need to adjust to these changing risks while using new technology to stay ahead of the competition.

In Australia, the insurance market is facing a mix of challenges.

Slow economic growth, rising living costs, higher inflation, low productivity, and high interest rates are all playing a role. At the same time, issues like climate change, social inflation, and cyber risks are adding more uncertainty. Insurers must find smart ways to manage these risks and stay innovative.

Insolvencies have continued to rise with ASIC data showing ongoing record highs with 3,000 companies entering external administration each quarter since the start of 2023 with the SME market worst hit. Industries such as construction, food and retail services, and manufacturing are being hit the hardest and Insurers writing D&O and management liability for the SME market will be keeping a close eye on trends in these industries.

For 2025, following years of significant premium hikes, the Australian insurance landscape is now experiencing a period of stabilisation and the sector is entering a softening market. Policyholders should see premiums reductions and an increase in insurer capacity and risk appetite. This shift is attributed to stabilising inflation, insurer profitability and increased market competition, offering more favourable conditions for policyholders.

Insurers are likely to focus on risk management, technology, and reinsurance strategies to maintain profitability and remain responsive to the evolving landscape. However, affordability and accessibility will be key issues, especially in regions with a high exposure to natural disasters.

In the spotlight

Worker to Worker Claims continue to be in the spotlight for insurers. There has been a significant increase for contract and labour hire workers that are injured during work and are paid out under workers compensation and the authority then seeks to recover the costs under an insured’s liability policy. The long delays in recovery, large claim quantum’s and difficulty in defending the claims make them particularly troublesome for Liability insurers. It is recommended for any insured’s that utilise contractors, sub-contractors or labour hire to ensure that any workplace injury notifications that are received are reported to your broker and liability insurer to ensure that disclosure obligations are being met.

Sexual Abuse and Molestation cases are showing no signs of abating with large awards and settlements which are now extending to a new wave of defendants. Cover is constricting under Liability with limited markets and increasing deductibles. Stringent risk management processes are required for any insured’s with the risk.

Recreation and live events risks are seeing continued stress on availability and affordability with sectors such as music venues, festivals, caravan parks, amusement rides, outdoor activity centres and camps becoming a distressed market for liability placements.

PFAS is a cause for concern in the US and has insurers on watch for insured’s that import products with this exposure with greater focus on importers declaring any products that may contain PFAS.

Psychological claims which have been increasing in the workers compensation sector are also starting to flow through into liability claims where primary and secondary psych claims are increasing damage awards.

Emerging risks such as cyber and privacy, ESG, climate, lithium batteries and AI are all on the insurers watch list.

Although from a natural catastrophe exposure the industry may have seen few natural disasters in 2023/24, ex-Alfred highlighted the broad footprint that we are seeing weather events impact.

Ex-Cyclone Alfred may have weakened before landfall, but its impact was severe, causing power outages, flooding, and property damage across southeast Queensland and northern NSW. To date there are over 95,000 insurance claims lodged and total losses nearing $1B. Navigating insurance claims following a cyclone or severe weather event is never straightforward. As seen with Ex-Cyclone Alfred, the classification of damage—whether from cyclone, storm, or flood—can significantly impact how claims are assessed and paid. Understanding policy wording, exclusions, and sub-limits is critical, particularly when dealing with Business Interruption, Prevention of Access, and Public Authority Closures.

Market update by Product

Property

Growing insurer appetite, entry of new market players, and involvement of local underwriting agencies are creating a positive trend in the Australian property insurance market.

Market trends:

• Fewer natural disasters in 2023/24
• Increased capacity for quality risks due to strong underlying profitability and softening reinsurance market
• Greater capacity for high-risk industries including EPS risks
• Broadening of natural catastrophe coverage such as flood
• Greater focus on risk mitigation in underwriting criteria and incentivising resilience measures.
• Pricing 0% to -20% rate reduction on low catastrophe, well managed risks.

Challenges:

• The impact from LA Wildfires is still uncertain but may have an impact on reinsurance for the July reinsurance renewals and appetite for natural catastrophe risks.
• Increasing exposure to natural catastrophes and the emergence of new catastrophe risks places pressure on the Australian insurance market in certain segments.

General Liability

In the casualty market, rates are stabilising after years of hardening. Not only has the combination of new insurance companies entering the market intensified competition, we have also seen long-standing insurers shift their strategies and appetites regarding industry segments, policy lines and capacity for “higher hazard” business.

Market trends:

• New market entrants and increased capacity from Lloyds
• Broader coverage and decreased deductibles
• Easing of underwriting restrictions
• Pricing -5% to -15%

Challenges:

• Adapting to an evolving legal landscape, including class action risks.
• Addressing cross-sector exposures in high-risk industries.
• Specific segments such as religious and educational risks, worker to worker, bushfire exposed, chemicals and US exposures.

Directors and Officers Liability

The Australian D&O market continues to see premium reductions driven by new markets and increased capital deployment. This heightened competition allowing for more favourable terms and conditions, including reduced deductibles and increased sub-limits.

Market trends:

• D&O insurers face increased claims activity due to litigation pressure from regulatory investigations, ESG-related shareholder actions, and governance failures.
• ESG and cyber considerations are a growing focus, placing corporate boards under greater scrutiny.

Challenges:

• Australian regulators have become more proactive in holding companies and their boards accountable, particularly in areas like cyber, privacy, and greenwashing,
• Addressing the complexities of ESG-driven litigation.
• Aligning coverage with evolving corporate governance expectations.
• Managing rising claims activity in Employment, Crime, and Insolvency due to the prevailing challenging economic conditions
• Pricing -0% to -15%

Professional Indemnity

Professional indemnity rates have decreased to levels not seen since 2016.

Market trends:

• Continued expansion of capacity from both Lloyd’s and local markets continues to drive downward pressure on rates across the sector.
• Increased capacity from London, along with new local entrants with broader appetites, has
• significantly improved conditions for accountants.
• Tech Professional Indemnity (PI) policies for IT professionals and consultants are now evolving to cover cyber-related claims, including data breaches, software failures, and intellectual property infringement.
• Pricing 0% to -12%

Challenges:

• Increased claims costs and frequency being driven by Social inflation, large and complex claims, specific high risk industries, increased regulator scrutiny and AFCA intervention.
• FinTech businesses operating in higher-risk sectors, such as credit card lending, unsecured personal loans, short-term business overdrafts, lines of credit, and startup business funding, face limited insurer interest.

Cyber Liability

In the cyber realm, the volume of incidents remained steady, with 87,400 reported for FY24. However, there have been notable changes in the legislative landscape, as the government has embarked on a legislative overhaul. Recently, we saw the introduction of the Digital ID Act and the AI Safety Standards, which lay the foundation for more substantial reforms, including the amendments to the Privacy Act. Passed in November 2024, these changes introduced a tort of privacy. However, the amendments stopped short of removing the small business exemption (for businesses with a turnover under AU$3 million) and the employee records exemption, which are expected to be addressed in the next round of changes.

The Cyber Security Act was also passed, which mandates the reporting of ransomware payments for critical infrastructure assets or businesses with revenues over AU$3 million. This legislation also sets out a framework for minimum security standards for internet-enabled smart devices.

Cyber risk remains a key focus for regulators, with ASIC issuing several pieces of guidance aimed at companies and their directors. The message is clear: failure to prioritise cyber risk adequately could result in prosecution following an attack.

There is the expectation that AI will feature more readily in breaches, increasing the speed at which vulnerabilities are exploited.

Market trends:

• Increased demand for Cyber insurance as companies combat escalating ransomware threats and evolving regulatory requirements (e.g., Privacy Act amendments). Companies are recognising the financial and reputational risks associated with cyber incidents and the legal obligations to protect data.
• Premium rates are typically only increasing when there are significant changes in underlying risk profiles.
• Insurers are enhancing their product offerings and offering expanded pro-active and post breach support risk management services including employee training and incident response. Providing a more holistic approach to cyber risk management, where insurers act as partners in prevention and mitigation.
• Risk Management Services: Insurers are expanding pre- and post-breach support, including employee training and incident response.
• Pricing – 0% to -8%

Challenges:

• Changes to privacy legislation and compliance in Australia introduced new requirements, such as mandatory ransomware payment reporting.
• Managing aggregate exposure to large-scale cyber events.

Construction

Market conditions have steadily improved in 2025, with increased capacity and a stronger appetite from both local and international markets, leading to more favourable renewal outcomes for insureds. From a construction liability perspective, the market is delivering a improvements for clients with rate reductions offered for the first time in many years for well performing accounts and those with strong risk management practices. Established local insurers have adopted growth-focused strategies, while new entrants from both London and Australia have embraced increased competition, increased capacity and offering policyholders better options, pricing and coverage.

Market trends:

• Premium rates have stabilised, with some reductions achieved where desirable risks are presented to the market.
• Insurers are continuing to closely assess and review risk management policies and procedures.
• Contractors with lower-risk activities and strong claims histories are seeing more favourable pricing.
• Insurers are focusing on tailoring products for high-value infrastructure and renewable energy projects, which carry unique risks.
• Pricing 0% to -10%

Challenges:

• Cost Escalations: The construction sector faces higher claims due to inflation, supply chain delays, and labour shortages that prolong project timelines and increase costs.
• Addressing coverage gaps for subcontractors and smaller firms.
• Coverage for construction projects in natural hazard exposed areas is becoming more complex due to climate-related risks such as floods and storms, particularly in regions prone to severe weather events.

Commercial Motor Insurance

Inflationary pressures continue to drive rate increases for the 3rd year in the row with greater increases for light commercial motor.

Market trends:

• Telematics Growth: Usage-based insurance products are increasingly adopted, offering personalised premiums and insights into driver behaviour.
• Electric Vehicles (EVs): With EV adoption rising, insurers are developing tailored policies to address unique risks such as battery replacement.
• Pricing 0% to 15% claims dependant

Challenges:

• Cost Escalations: The construction sector faces higher claims due to inflation, supply chain delays, and labour shortages that prolong project timelines and increase costs.
• Addressing coverage gaps for subcontractors and smaller firms.
• Coverage for construction projects in natural hazard exposed areas is becoming more complex due to climate-related risks such as floods and storms, particularly in regions prone to severe weather events.

Emerging risks

Climate Risk

Insurers are innovating products to address the increasing frequency and severity of weather events, while regulatory scrutiny around climate-related disclosures intensifies.

Regulatory Developments

The Australian Prudential Regulation Authority (APRA) is imposing stricter capital adequacy and risk management standards.

Technology Adoption

AI, blockchain, and other technologies are reshaping underwriting and claims processes, providing efficiencies but also introducing new risks.

Conclusion

The Australian insurance market is navigating a challenging landscape in 2025. Rising premiums, claims, and regulatory demands are driving innovation in risk assessment and product development. Despite the hurdles, the industry is poised for resilience and growth by embracing technology, sustainability, and tailored underwriting strategies.

We are here to help!

A proactive approach will increase your potential to secure the best insurance for your business. It will also give greater access to new insurance capacity entering the market, both locally and overseas.

We can help your business with insurance planning and preparation through:

• greater risk awareness;
• better risk management; and
• adequate risk mitigation.

Contact one of the team today to answer any questions and to discuss your needs.

The information on this page is intended for general educational purposes and necessarily simplifies some concepts for clarity. Insurance policies can differ widely between insurers, policy types, and jurisdictions. For guidance on your specific circumstances, you should review your policy documents carefully and consult a qualified insurance adviser, broker, or legal professional.