Statewide Insurance Brokers - Pacific Insurance Market Report

Marsh Risk Management Research
FEBRUARY 2014
Market PersPective
pACIFIC
INSURANCE MARKET REPORT 2014

ii Insurance Market report 2014
Contents
Executive Summary
2
Foreword
1 11 Aviation
12 Employee Benefits
13 Environmental
14 Marine Cargo
15 Trade Credit
INSURANCE markets
BY SPECIALTY
(australia)10
17 New Zealand
19 Papua New Guinea
21 Fiji
23 Multinationals
24 Captives
other markets
165 Casualty
7 Property
8 Financial and Professional Services
major
coverage lines
(australia)4

1Marsh
Marsh is pleased to share with you our Insurance Market Report
2014 for the Pacific region. In this publication, we provide you
with a concise update on the insurance market in 2013 and insight
into what lies ahead.
The insurance market is dynamic and susceptible to change from
a variety of different causes. In recent times, the availability and
price of insurance capital has been most directly influenced
by the occurrence of catastrophe loss events around the world.
2013 was a relatively uneventful year in this regard, and most
often indicators of change pointed in favour of insurance buyers
rather than insurers.
With record levels of surplus capital in the global insurance
market fuelling healthy competition among insurers, 2014
could prove to be another year of favourable conditions for
Marsh clients. No matter the market cycle, and whatever your
risk-transfer objectives may be, our experience tells us that
success in the insurance market goes to those with improving
risk profiles, quality underwriting information, and carefully
planned and executed placement strategies.
John Clayton
Pacific Region Head & CEO Australia
Foreword

2 Insurance Market report 2014
EXECUTIVE
SUMMARY
The year 2013 concluded with the most
competitive insurance market seen in many
years. There continues to be an influx of new
capital into the reinsurance market (estimated
at A$10 billion in 2013) and this surplus is
fuelling intense competition. The New Zealand
market has returned to some normality with
insurers competing to repatriate business back
from international markets.
Most insurers’ profits in the Pacific region increased in 2013, driven by a benign
catastrophe season in Australia, New Zealand, and throughout the world. They
have also benefited from increased premiums in the domestic insurance sector,
which accounts for around half of Australian market premiums.1 However, signs
are very positive for 2014.
Global equity markets performed strongly in 2013, particularly in the second
half of the year. The business sentiment is more positive than in recent years,
and there is a genuine belief that signs of recovery are real. Resource and
infrastructure developments that were postponed in the last two years have a
better chance of being launched in 2014, which is good news for the economy
and the insurance market.
1 Australian Prudential Regulation Authority, General Insurance Supplementary Statistical Tables,
available at http://www. apra.gov.au, accessed June 2013.

3Marsh
MARKET OVERVIEW
Australia
ȫȫ The intense competition in the
property market, which started with
real estate and infrastructure clients,
spread to the manufacturing sectors
as 2013 progressed. Insurers are now
offering broader policy coverage and/
or improved policy conditions, such
as increased sublimits, in order to
differentiate their products and gain
a competitive advantage. We expect
this trend to continue during the first
half of 2014; it will be interesting
to see how the market responds in
the second half of the year, as many
clients will have benefited from the
market conditions in 2013.
ȫȫ If there is a difficult area of the
market, it is power and mining risks.
Several large losses occurred within
these industries in the local and
global markets again in 2013. As a
result, several major insurers and
reinsurers are providing less capacity
for these risks.
ȫȫ Liability premiums have been
declining for a number of years and,
despite insurers having released a large
percentage of their reserves, premiums
still show no signs of increasing. The
exception to this is high-frequency
accounts such as retail and real estate,
where the claims trends are a cause
for concern with underwriters. As
noted last year in this report, bushfire
liability exposures are problematic
for the market, with several insurers
having reduced their capacity.
ȫȫ The directors and officers (DO)
liability market is improving for buyers.
Primary policy wording enhancements,
with an increased appetite for primary
positions by insurers on risk managed
business, coupled with new excess
entrants created a competitive
environment for 2013.
ȫȫ At the beginning of 2013, the energy
market was described as “flat to
marginally up.” By year’s end that
description changed to “flat to
marginally down.” There are, of
course, variations in a number of
segments of the energy market: liability
is stable, the upstream market is
definitely declining, and downstream
is just holding with reductions
starting to appear. Capacity remains
strong with the expectation that
available capacity will increase in the
first quarter of 2014.
ȫȫ The state-based workers’ compensation
schemes began to show improved
returns for governments and insurers.
The New South Wales’ (NSW) scheme
achieved a dramatic turnaround
from a A$4 billion deficit two years
ago to a A$309 million surplus in
2013. Most states are undertaking
a benefit and legislative review to
improve performance.
New Zealand
ȫȫ The market moved from a stable
position to a highly competitive one
in the second half of 2013. Following
the Canterbury earthquakes, a large
volume of business moved to the
London and European markets.
Uncertainty in the reinsurance market
and the fear of more losses caused the
local market, in some circumstances,
to overreact on premiums and
coverage. Local insurers are now
competing to repatriate the lost
business, which is producing positive
results for buyers at renewal.
Papua New Guinea
ȫȫ Being an “admitted” insurance market,
with a comparatively small number
of registered insurers, competition is
relatively strong. Property and liability
premiums increased modestly in the
fourth quarter of 2013, with this trend
expected to continue into 2014.
Fiji
ȫȫ Insurance for flood and wind
exposures is proving to be challenging
for major buyers, with the London
market providing much needed
capacity. Rates firmed in 2013 and the
expectations are that they will firm
again in 2014. Many small and midsize
enterprise (SME) clients are foregoing
flood cover, as it is no longer available
at reasonable terms.
Market Summary
ȫȫ It is positive news, in the main, for
insurance buyers with improved market
conditions. It has been good news for
insurance company shareholders with
greatly improved profits. These two
situations would logically appear to
be in conflict. They may be mutually
sustainable, but only if catastrophe
costs remain relatively low and
insurers maintain adequate pricing
in the domestic insurance market.
ȫȫ Insurance Australia Group (IAG)
recently announced the purchase of
Wesfarmers Insurance's Australia
and New Zealand underwriting
operations. Is this the beginning of
market consolidation witharoundof
mergersandacquisitions?Anymajor
consolidationcould have a profound
effect on market capacity and
competition.
ȫȫ 2013 produced a much better investment
result for insurers, with recovery in
equity markets. Investment returns
will play an important role in the
direction of the insurance market in
2014 and beyond.

Major
coverage lines
(australia)
5 Casualty
7 Property
8 Financial and Professional Services

5Marsh
INSURANCE MARKET CONDITIONS
Coverage Rate change Q4 2013 Rate change Q4 2012
GENERAL LIABILITY DECREASE 0% TO 10% STABLE -5% TO +5%
MOTOR/AUTOMOBILE DECREASE 0% TO 10% STABLE -5% TO +5%
WORKERS’ COMPENSATION/
EMPLOYERS LIABILITY
STABLE -5% TO +5% STABLE -5% TO +5%
Market Commentary
Motor/Automobile
2013 was a profitable year for the
majority of commercial motor insurers
due, in part, to the absence of major
weather events. As a result of these
favourable underwriting results, there
was a marked increase in competition
among Australian insurers in the
third and fourth quarters of 2013. For
corporate clients with well risk-managed
motor fleet policies, rates decreased 5%
to 10% on average.
Clients with a consistently poor claims
experience and a lack of risk improvement
have not benefited from this competition,
as insurers are reluctant to expose their
portfolios to these loss-making accounts.
Insurers continue to focus on controlling
and reducing claim costs by streamlining
claims processes, establishing more
efficient repair networks (including
entering into ownership of selected
repair facilities), and taking more active
management of the supply of automobile
parts. As part of this focus on reducing
claim-processing costs, one major
insurer has recently moved its claims
management function offshore.
In 2014, competition is expected to
remain strong between insurers for
clients with strong risk management and
good claims experience, subject to no
major weather events in the first quarter
adversely impacting portfolio loss ratios.
Contact:
Scott Greuter
National Manager, Liability Motor Risks,
Marsh McLennan Agency
+61 2 8864 8372
scott.greuter@marshmc.com
Casualty
General Liability
From a casualty perspective, the
term “business as usual” would
seem appropriate.
Capacity remains plentiful, so the
predicted positive environment for
most insurance buyers should continue
into 2014. The exceptions and areas of
volatility are the high-incident segments
and clients with bushfire exposure.
There is an increasing trend in both the
numberofincidentsandtheaveragecostsof
claimsinhigh-frequencyliabilitysegments
such as retail and real estate. There is
also a pronounced increase in contractor/
labourhireworkers’compensationrecovery
actions.Ifthistrendcontinues,insurerswill
look to increase premiums/deductibles in
these industry segments.
Insurers are cautious regarding bushfire
liability and continue to monitor their
aggregate exposures in certain sectors
such as utilities, government, and
contractors involved in the industry.
It is anticipated that traditional insurers
of these risks will offer less capacity.
There is replacement capacity available,
but this capacity may not be
as competitively priced.
Business continues to return to the
Australian market from London due to
competition and multinational program
requirements. The London market’s
role is increasingly being restricted to
complex risks.
The number of insurers with the ability
to underwrite and administer global
programs from Australia has increased
substantially in recent years. This
is bringing more competition to this
segment of the market, which historically
has been underserviced.
Contact:
Steve Gosnell
Head of Casualty – Placement Services –
Southern Region
+61 3 9603 2268
steve.gosnell@marsh.com
The above represents the typical rate change at renewal for average/good risk profiles.

Workers’ Compensation/Employers Liability
The past year has seen a number of significant reforms to workers’ compensation schemes across the country, as state
governments and regulators embark on wide-scale reviews of the efficiency and performance of their schemes.
State/Territory Premium Variation Underwritten/Government Controlled
Australian Capital Territory Increase 0% to 10% Government controlled and underwritten by insurers
New South Wales Decrease 5% to 10% Government controlled and agent administered
Northern Territory Increase 0% to 10% Government controlled and underwritten by insurers
Queensland Stable -5% to +5% Government controlled and administered
South Australia Stable -5% to +5% Government controlled and agent administered
Tasmania Increase 10% to 20% Government controlled and underwritten by insurers
Victoria Stable -5% to +5% Government controlled and agent administered
Western Australia Stable -5% to +5% Government controlled and underwritten by insurers
National – Comcare
On 2 December 2013, the federal
minister for employment announced that
the government will lift the moratorium
on private corporations seeking
to become self-insurers under the
commonwealth workers’ compensation
scheme, Comcare. The moratorium was
introduced in December 2007 under the
former labor government. A number of
major companies are expected to pursue
Comcare as an alternative to their
existing state-based arrangements.
Scheme Performance
Nearly all schemes across Australia
delivered improved funding ratios in 2013
compared to the previous year, with the
legislative reforms and rating changes
having a profound impact. As an example,
the impact of the 2012 legislative reforms
in New South Wales contributed to a
scheme turnaround from a $4 billion
deficit position to a $309 million surplus
in the space of two years.
Legislativechangesare under way across
Queensland and WesternAustraliathat
arefollowingrecentscheme reviews, with
other states such as Northern Territory,
South Australia, and Victoriaexpected
toannounceperformanceimprovement
initiatives in 2014.
With improved scheme performance,
and after small but steady increases over
recent years, workers' compensation
rates are expected to stabilise in 2014,
with decreases available for superior-
performing client accounts.
Contact:
Robert Peseta
Principal, Workforce Strategies
+61 2 8864 8739
robert.peseta@marsh.com

7Marsh
Property (CATASTROPHE-exposed) Decrease 0% to 10% Increase 0% to 10%
Property (NON-CATASTROPHE-EXPOSED) Decrease 10% to 20% Stable -5% to +5%
Should market capacity increase again
in 2014, rates may even dip below those
enjoyed prior to 2001.
Premium rates were not the only area
of improvement offered in 2013. In
many cases, expanded policy coverage
was available, and it improved upon
the onerous conditions (sublimits and
deductibles) imposed following the
catastrophe events in Queensland,
New Zealand, Thailand, and Japan.
Not all industry sectors have benefited
from improved market conditions.
Industries such as power and mining
have continued to deliver losses to the
local and global markets. Consequently,
market capacity has actually reduced
slightly. This, combined with low insurer
appetite for these industries, has resulted
in a difficult market from a pricing and
coverage perspective. For these clients,
London and European markets continue
to be influential program participants.
The year 2013 was one where the economic
dynamic of supply and demand tipped
firmly in favour of the insurance buyer.
Despite this change and the general
decline in market pricing, many insurers
posted healthy profits. The competition
was much less intense for micro SME
and domestic insurance; in fact, insurers
were able to achieve reasonable premium
increases in these portfolio sectors.
The profit results also benefited greatly
from a benign weather season, resulting
in a lower number of catastrophic
events, which were also less severe
in consequence.
Looking ahead, intense competition is
expected to continue in 2014. In the first
half of 2014, clients may benefit more as
there could be some “catch up” on rate
reductions, as the size of the reductions
for clients actually increased in the last
half of 2013. However, once again, it will
be those clients that have continued
to improve their risk profiles through
enhancements to risk management
processesandprocedures,adherencetorisk
recommendations, and close supervision
of claims activity that will position
themselves for the greatest benefit.
Contact:
Mark Mitchell
Senior Vice President, Placement Services
+61 2 8864 8376
mark.mitchell@marsh.com
Market Commentary
Following a year of heightened insurer
sensitivity to catastrophe exposures,
2013 proved to be a very different market
environment, driven fundamentally by
record levels of capacity. Although some
established local insurers substantially
increased their capacity, clients also
benefited from a strong developing
interest in Australian business by
insurers in China, Japan, and Singapore.
Although the heightened level of interest
fromtheAsianmarketswasinitiallylimited
to certain industry segments and specific
clientparameters,therewasabroadeningof
appetite as the year progressed, and this is
expected to develop further in 2014.
A review of 2013 placement results
across industry segments indicates
average reductions of 10% were achieved;
however, the reductions were much
higher for certain low-risk , high-profile
clients that were remarketed last year.
It would appear that rates for certain
industry segments, such as real estate
and infrastructure, are now beginning
to challenge those offered prior to
September 2001.
Property

DIRECTORS AND OFFICERS (DO) Liability Decrease 0% to 10% Stable -5% to +5%
Professional Liability Decrease 0% to 10% Stable -5% to +5%
Financial Institutions Increase 0% to 10% Increase 20% to 30%
Medical Malpractice Stable -5% to +5% Stable -5% to +5%
Professional Liability
Strongcompetitiondevelopedinthemarket
in the third and fourth quarters of 2013
for low-to medium-risk professions.
Not only was there downward movement
in premiums,insurersbegantooffer
expandedpolicy coverage to differentiate
their product.
Although the London market is still
active, particularly for the complex
professions, Australian insurers have
driven the intensity of price competition
in an attempt to further build or solidify
portfolio critical mass.
There has been a lack of infrastructure
and resource developments due to
the economic slowdown and various
government elections, resulting in
less demand for construction-project-
specific policies. There is an expectation
this will change during 2014.
Market Commentary
DO Liability
In 2013, there was an increase in
the overall supply of capacity to the
commercial DO liability market from
both local and overseas insurers. This
increase resulted in ongoing general
market softness for clients with strong
risk management and a good claims
record. Competition was especially
strong in higher-level excess placements.
A further sign of an improving market
for buyers is insurers offering long-term
agreements, as well as direct or round-
the-clock reinstatements.
Therehasbeenincreasedclaimsactivityfor
Side C (entity security cover). In an attempt
to offset this trend insurers are seeking to
raise retentions (in lieu of premiums).
Major risk issues for insurers include:
ȫȫ Merger, acquisition, and
divestiture activity.
ȫȫ Liquidity issues.
ȫȫ Re-evaluation of assets or write-
down risk.
ȫȫ Major cost-cutting initiatives.
ȫȫ Restructuring of debt, particularly
with US exposures.
Financial and
Professional
Services

9Marsh
Some professions, including financial
planners, valuers, and real estate agents
with a large percentage of property
management activities, still face
challenging market conditions. No
easing is expected for these sectors in
the short term.
A range of new insurer product suites
was seen in 2013, along with a growing
discussion on issues such as privacy,
cyber, and network security. Many
clients are taking the opportunity to
review and/or rationalise their first and
third party risks covered by professional
liability and commercial crime policies.
Financial Institutions
In the second half of 2013, the market
for major financial institutions saw
increases slow or stabilise. This trend is
expected to continue during 2014.
Insurers that would otherwise look to
rate increases are strongly encouraging
clients to take higher deductibles.
Capacity continues to be tightly
controlled, with most insurers capping
limits in the A$10 million to A$15 million
range, which is considerably different
than the A$20 million to A$25 million
limits traditionally seen a few years ago.
Mid-cap and smaller financial
institutions, particularly those with
minimal retail exposures, are now being
pursued by insurers. This increased
appetite and competition is expected to
limit or potentially drive competitive
premiums in this sector of the market
during 2014.
Medical Malpractice
Several Australian insurers have an
increased appetite and offered additional
capacity for small/midsize clients in the
health care sector. This trend is expected
to create modest pressure on pricing
during 2014. As with most classes, buyers
need to demonstrate a comprehensive
risk management strategy, and specifically
for malpractice claims, independently
audited claims data. The global lack of
appetite for clinical trials and maternity
coverage continues to be a challenge in
the marketplace.
Contact:
Paul Ducat
National Manager, FINPRO
(Placement Services)
+61 2 8864 7656
paul.ducat@marsh.com

INSURANCE
markets BY
SPECIALTY
(AUSTRALIA)
11 Aviation
12 Employee Benefits
13 Environmental
14 Marine Cargo
15 Trade Credit

11Marsh
Aviation
Market Commentary
Capacity remains plentiful in the Pacific
region with general aviation and regional
airline fleet clients buying smaller limits.
There is intense competition between local
insurers, resulting in substantial premium
discounts for clients in this segment of
the market. The situation is similar for
aerospace risks (regional airports, ground
service providers, and maintenance, repair,
and overhaul [MRO]).
The major review criteria by insurers
is claims activity, limits purchased,
international exposures, operational
risks, and self-insured retentions.
Major aerospace clients such as major
airports and MROs are purchasing
large limits of liability, but are still best
placed with the specialised UK insurers.
Discounts of approximately 25% were
achieved with international insurers
during 2013. Market conditions are
expected to remain very favourable for
buyers during 2014.
Contact:
Doug Williamson
National Manager, Aviation
+61 7 3115 4579
douglas.b.williamson@marsh.com
insurance market conditions
General Aviation Decrease 10% to 25% Decrease 0% to 15%

Health Increase 0% to 10% Increase 0% to 10%
Life Increase 10% to 20% Stable -5% to +5%
Accident and Health Stable -5% to +5% Stable -5% to +5%
cost-mitigation strategies, including
advice on benefit design and more
rigorous risk management, particularly
in relation to claims.
Accident and Health
An extremely healthy market exists,
with most carriers offering products
directly or through agency providers.
Competition is strong across the market
and premiums remain competitive
as a result. It is interesting to note
that whilst some direct markets have
withdrawn from new business activity,
other insurers are looking to reinvigorate
their personal accident portfolio. This
trend has been evident for some time
and, whilst it continues, aggressive
pricing and favourable policy terms and
conditions will be available.
Insurers remain selective on the nature
of risk they will underwrite. However,
there is a greater inclination to secure
enterprise agreement income protection
risks predominantly covering “blue and
heavy blue collar” workforces across
industries that were previously hard-to-
place risks.
Contact:
Mark Butson
Managing Principal, Employee Benefits
+61 3 9603 2379
mark.butson@marsh.com
Market Commentary
Health
Domestic health insurance is a controlled
environment in Australia, with the
government limiting the number of
insurers in the marketplace. Despite
this restriction, adequate competition
exists for individuals or corporations
that require coverage. Both Australia
and New Zealand provide a basic public
health system, which citizens and
permanent residents can access.
The Australian health minister has
signed off on a weighted average rate
increase of 6.2% effective 1 April 2014,
which is well above the rate of inflation.
This represents the largest rate increase
since 2005 and it is anticipated that
citizens will look to soften this increase
by reducing coverage, or even potentially
cancelling cover. Corporate-subsidised
plans will also come under pressure,
with premium subsidisation potentially
being capped.
Expatriate health claims continue to
increase in accordance with increasing
medical treatment and well above
the consumer price index (CPI) of
most countries. This will result in
insurers taking a cautious approach
to poor-performing client accounts,
compelling employers to increase
pressure upon expatriates to accept a
greater responsibility for premiums and
increased deductible/co-payments.
Life
In Australia, rates are hardening for
life, total and permanent disablement,
and salary continuance insurances.
This effect is due to a combination of
factors, including insurer/reinsurer
losses on claims from large industry
superannuation schemes, new capital
requirements for life insurers, and low-
investment returns on insurer funds.
Insurers are being more selective about
the risks that they will consider. Despite
the deteriorating market, insurers are
still keen to maintain market share.
It is anticipated that this market
correction will continue throughout
2014 as premium rate guarantees for
polices progressively expire. This, in
combination with reduced market
capacity, especially for disablement
covers, means that clients are seeking
Employee Benefits

13Marsh
environmental (various) decrease 0% to 10% decrease 0% to 10%
Market Commentary
The environmental market remains very
competitive in the Pacific region, mainly
due to the significant increased capacity
offered by insurers. In addition, there
were a number of new market entrants
competing for market share and chasing
premium pool in a limited client market.
In 2013, clients were generally
offered better coverage as part of
their renewal process, in addition to
competitive pricing.
The buyer's market has not expanded
to levels anticipated by insurers.
Therefore, insurers are offering
very attractive long-term premium
agreements for new buyers.
Contact:
Lionel Mintz
Asia Pacific Manager, Environmental Practice
+61 2 8864 8213
lionel.mintz@marsh.com
Environmental

MARINE CARGO (various) decrease 0% to 10% decrease 0% to 10%
Market Commentary
The marine cargo insurance market in
Australia remains competitive. There
is ample capacity for large risks with
insurers competing aggressively for
good quality cargo risks. The significant
slowdown in development of new
resource projects has affected project
cargo and delayed start-up premium
income into the market. There is also a
knock-on effect regarding those sectors
servicing the mining and construction
industry. Consequently, in an attempt
to reduce exposure to boom or bust
cycles of project cargo, insurers are
now concentrating on developing small
and medium enterprise (SME) cargo
portfolios where they can write business
as cost effectively as possible.
Specialty cargo businesses incorporating
inherent vice risks such as bulk oil,
frozen/chilled meat, and steel are written
selectively by a relatively small number
of insurers. These types of clients require
a high degree of risk management.
Although there is competition in this
space, premium terms are essentially
risk and claims driven.
Marine Cargo
Contact:
James Metters
Managing Principal, Marine
+61 2 8864 8276
james.r.metters@marsh.com

15Marsh
Whole Turnover Credit (Australia-wide) Decrease 0% to 10% Decrease 0% to 15%
Structured Credit (Australia-wide) Stable -5% to +5% Stable
Market Commentary
Australia continues to be an interesting,
if limited, market for whole of turnover
credit insurance, restricted to just four
main insurers: QBE, Atradius, Euler
Hermes, and Coface.
Despite the shortage of insurers,
competition between them remained
fierce in 2013 and is likely to continue
in the short term. Reduced rates are
expected, as is maintenance of high
levels of buyer risk cover. This is a
welcome prospect for both existing
clients and prospective clients, especially
as insolvencies in Australia continue to
climb year-on-year (around 15,000 so far,
according to Australian Securities and
Investment Commission [ASIC] figures).
Innovation will be the flavour of 2014
from the top four trade credit insurers.
More sophisticated online client
platforms, integrated debt collection
solutions, and more fixed limits cover
being offered are the developing trends
in the market.
Trade Credit
Risk Trends
The worst-hit sectors were no different
from recent years, with building and
construction, electrical, manufacturing,
timber, and steel all experiencing major
claims activity. High-profile insolvencies
were limited in 2013, which enabled
insurers to keep rates competitive and
cover high. However, there is a general
feeling that it could only take two or
three larger collapses to force one of the
big four to break rank and use this to
reverse the trend of low rates.
There are a handful of structured credit
insurers available to Australian buyers.
They generally limit their offerings to
large single one-off lines, or on single
or very limited buyer portfolios. This
cover tends to be available only on larger
investment-grade and country risks.
These insurers continue to be careful
but competitive given the very selective
nature of the product and, therefore, rates
remain stable for this cover. The number
of insurers is expected to grow in 2014,
with new entrants seeking to capitalise on
the current improved returns.
Contact:
Dean Jenkins
Principal, Trade Credit Political Risk
+61 02 8864 7652
dean.jenkins@marsh.com

OTHER
MARKETS
17 New Zealand
19 Papa New Guinea
21 Fiji
23 Multinationals
24 Captives

17Marsh
market share, balanced against the
post-Canterbury earthquakes revised
underwriting criteria.
In the larger corporate space, the local
insurance market is doing its best
to attract clients back from overseas
insurers, as well as competing heavily
to retain all of their existing portfolios
against attack from local competition.
For clients that have active risk
management and a positive risk profile,
this is providing great leverage in
creating competitive tension, which in
turn has resulted in some significant
premium-cost reductions.
insurance market conditions
General Liability Stable -5% to +5% Stable -5% to +5%
Motor/Automotive Stable -5% to +5% Stable -5% to +5%
Property (CATASTROPHE-exposed) Decrease 0% to 10% Increase 0% to 20%
Property (NON-CATASTROPHE-EXPOSED) Decrease 0% to 10% Increase 0% to 20%
Environmental (various) Stable -5% to +5% Stable -5% to +5%
DIRECTORS AND OFFICERS (DO) liability Stable -5% to +5% Stable -5% to +5%
Financial Institutions Increase 0% to 10% Increase 0% to 10%
Professional Liability Stable -5% to +5% Stable -5% to +5%
Marine Cargo (various) Decrease 0% to 10% Decrease 0% to 10%
Health Increase 0% to 10% Increase 0% to 10%
Life Stable -5% to +5% Stable -5% to +5%
Market Commentary
GENERAL LIABILITY
The general liability market in New
Zealand will remain stable into 2014 due
to the continued high levels of capacity
available. In the future, regulatory
changes in occupational health and
safety may result in increased employer
obligations to employees.
MOTOR/AUTOMOTIVE
The motor market remains stable,
which is predominately driven by
claims experience. However, premium
relief is available to those clients
who are investing in fleet risk
management programs.
PROPERTY
The New Zealand property insurance
market for 2014 will remain a challenge
for some and provide a good-news story
for others, depending on individual risk
profile and size of business.
This is due to a number of factors,
including the returning competition
from local insurers to retain or increase
New Zealand

Conversely, small and medium
enterprises (SMEs), or those suffering
from seismic-strength building
challenges, are still finding the
market challenging.
Local insurers are pushing for increases
in premium, although with a well-
defined placement strategy, improved
results are certainly achievable.
DO Liability
In a result which may not find favour
with many insureds, the New Zealand
Supreme Court has issued its decision
in the Steigrad proceedings.2 The ruling
is that a statutory charge “freezes” all
the proceeds of any insurance available
(in this case DO liability insurance) to
meet the insured’s liability for damages
or compensation, where a third party’s
claim against them exceeds the
limit of insurance. This means that
combining defence costs and third
party compensation/damages cover in
a single limit of liability leaves insureds
potentially without access to their defence
costs cover.
Pending legislative change or a further
New Zealand Court decision on whether
insurers are obliged to advance defence
costs, it is recommended that clients
should maintain ring-fenced defence
costs cover under their liability policies,
or seriously consider doing so if they
have not already.
The professional liability market
is seen as stable to softening due
to the emergence of new capacity
(predominately via Lloyd’s of London)
with very little legacy claims costs
arriving in the region. This is driving
competition between insurers that wish
to retain their market share locally.
MARINE CARGO
This is a highly competitive cargo
market in which insurers are
known to provide continuous policy-
wording enhancements.
Contact:
Nathan Richmond
Senior Vice President, Placement Services
+64 9 928 3094
nathan.richmond@marsh.com
2 BFSL 2007 Ltd Ors (in liq) v Steigrad [2013]
NZSC 156.

19Marsh
General Liability Increase 0% to 10% Stable -5% to +5%
Motor/Automotive Stable -5% to +5% Increase 0% to 10%
Property (CATASTROPHE-exposed) Increase 0% to 15% Increase 0% to 20%
Property (NON-CATASTROPHE-EXPOSED) Increase 0% to 15% Increase 0% to 15%
Environmental (various) Stable -5% to +5% Stable -5% to +5%
DIRECTORS AND OFFICERS (DO) Liability Stable -5% to +5% Stable -5% to +5%
Financial Institutions Stable -5% to +5% Stable -5% to +5%
Marine Cargo (various) Decrease 0% to 10% Decrease 0% to 15%
Health Stable -5% to +5% Stable -5% to +5%
Life Stable -5% to +5% Stable -5% to +5%
Market Commentary
Papua New Guinea
Papua New Guinea is an “admitted”
insurance market and, therefore, all
insurance placements with any Papua
New Guinea exposure must be offered
to local licensed insurers.
Although it is possible to obtain an
exemption to this rule by arranging for
offshore placements, it is a lengthy process.
However, since last year’s election, greater
pressure is being applied by the regulator
(insurance commissioner) to support
local insurers, as well as local reinsurance
placements. As a result, exemptions are
not easily achievable.
Motor/Automobile
The motor market remains stable and is
predominately driven by loss experience.
Fleet risk management programs and
driver usage controls are potential rate
discount factors.
Premiums are relatively high due to vehicle
and parts costs, poor road conditions, and
lack of safety awareness.
Property
There have been a number of sizable fire
claims during 2013, particularly in Lae
and outer regions. Therefore, clients are
vulnerable to potential rate increases
and/or increased deductibles in 2014.
Good fire protection and housekeeping
will greatly assist in achieving
nominal increases.
Liability
Premiums remain very low for this
class of insurance, as there are still no
significant litigation awards adversely
affecting claims experience.

20Insurance Market report 2014
Financial and Professional Services
(DO and Professional Liability)
Competitive premiums continue to
be available.
Marine Cargo
All insurers are keen to underwrite
this class, and competition has kept
premiums from increasing.
Medical
This is also a very competitive market,
with claims service of the utmost
importance. Adequate limits need to be
considered for Medivac coverage, which
is recommended for executives.
Workers’ Compensation
This is legislated compulsory cover
providing full medical costs, but
very limited capital and weekly
salary benefits.
Alternative placement structures,
such as claims-adjusted programs,
are available for major commercial
clients. Implementing risk and claims
management programs will assist in
reducing premium costs.
Salary continuance and personal
accident/life cover should be considered
for executives.
Contact:
Graeme Murray
Executive Director – Marsh Ltd PNG
National Broking Operations
+675 309 8021
graeme.murray@marsh.com

21Marsh
Fiji
General Liability Stable -5% to +5% Stable -5% to +5%
Motor/Automotive Increase 0% to 10% increase 10-20 %
Workers’ Compensation Increase 0% to 10% Stable -5% to +5%
Property (CATASTROPHE-exposed) Increase 10% to 20% increase 5-10 %
Property (NON-CATASTROPHE-exposed) Stable -5% to +5% Stable -5% to +5%
DO Liability Increase 0% to 10% Stable -5% to +5%
Financial Institutions Increase 0% to 10% Stable -5% to +5%
Medical Increase 20% to 30% increase 10-20 %
Marine Cargo (various) Stable -5% to +5% Stable -5% to +5%
Market Commentary
General Liability
Fiji has a stable general liability market
and this is not expected to change in 2014.
Policies issued locally are subject to local
jurisdiction and, with these restrictions,
premiums have remained stable.
Motor/Automobile
As with general liability, the motor
vehicle market is stable and expected to
remain this way in 2014. Rate increases
generally apply to policy holders affected
during the 2012 floods and cyclones and
those with a poor claims record.
Workers’ Compensation
The market for this class of business
is stable, and it is one of the more
acceptable classes of business by
insurers, except for workers in a high-
risk category. Common-law liability
claims are rare.
Property
The current state of the market remains
very challenging for buyers seeking to
secure flood insurance in Fiji. Floods
pose a significant threat to a number
of locations within the major islands
(Viti Levu and Vanua Levu), but full and
adequate flood insurance is not available.
There are very limited offshore markets
interested in writing Fiji business due to
the catastrophe exposures.
For clients with significant asset values,
or where the nature of the business
attracts limited capacity within the local
insurance market, the London market
plays an important role. For catastrophe
perils, premium rates are dictated by loss
experience and reinsurance costs.

As with DO liability, there is only one
local insurer that is able to write this
risk. Insurance is usually driven by
clients having to comply with contractual
requirements. As with other professional
liability policies, terms are usually
dictated by offshore market forces. All
professional liability policies (including
DO liability) now attract stamp duty
charges at a rate of 15% of the premium.
These policies were previously exempt.
Medical
This is not an attractive business for
insurers in Fiji due to the rising cost
of medical treatment both locally and
overseas. Of the seven local insurers, four
of them provide medical insurance. The
bulk of the claims relate to evacuation
abroad for treatment due to lack of
facilities in the local hospitals. Premiums
are dictated by claims experience and
offshore treatment costs.
Marine Cargo
There is no significant change in marine
cargo, although the stamp duty charges
are now 10% of the total premium,
compared previously to 0.10% of the total
insured value for exports only.
Contact:
Daniel Yee
Director/Country Head
+ 67 9 322 7300
daniel.p.yee@marsh.com
Financial And
Professional Services
DO Liability
QBE is the only local insurer that can
write professional liability, including
DO liability. A lot of reliance is,
therefore, placed on New Zealand and
Australian insurers for this cover.
There is a relatively small DO liability
portfolio in Fiji; awareness of DO
liability is increasing, however, due to the
recent introduction of the crimes decree
and, more significantly, the proposed
2013 Companies (Amendment) Decree,
which is expected to be gazetted in 2014.
As a result, local company directors
will have to adhere to a range of new
requirements. Directors will be required
to meet higher levels of disclosure,
transparency, and accountability in
relation to their conduct. The legislation
will bring Fiji in line with international
best practice. This means that the
tightening regulatory regime is likely to
see clients review their exposures.
Financial Institutions
Again, with the growing awareness
regarding transparency, accountability,
and consumer rights, the demand for this
policy is expected to grow in 2014, albeit
at a moderate pace.

23Marsh
INSURANCE MARKET
CONDITIONS
Market Commentary
The recovery of the Asia-Pacific
insurance market, following the series
of catastrophic events in 2011 and
improved balance sheet strength of
multinational insurers, continues to
provide competitive insurance capacity
in the multinational sector. This,
combined with the ongoing strategic
focus of insurers to develop and expand
multinational insurance capabilities as a
means of securing access to international
clients, provides a broader platform for
generation of competitive tension, with
an increasing number of insurer options.
The strategic focus of multinational
insurers also brings advancement of
system infrastructure capabilities
to provide client- and broker-facing
technology to assist with management of
global programs, including capabilities
supporting knowledge sharing of
regulatory environments, and policy
management to streamline and
aggregate program information across
international borders.
Multinationals
Risk Trends
DO Liability
As a result of more rigorous scrutiny
by regulators and trends towards
global expansion, directors and
officers may become more exposed to
litigation in another country, with local
legislation potentially inhibiting or
prohibiting indemnification.
As a result, global DO insurance
programs are becoming more
sophisticated to ensure compliance with
prevailing local regulations, and provide
the requisite cross-border protection
required by directors and officers.
This trend towards multinational
solutions for financial risks follows the
well-established culture that exists in
the traditional property and casualty
segments, and global insurers continue
to develop strategies and capabilities
in this area.
Employee Benefits
Increasingly, global organisations are
seeking to harmonise or streamline
employee benefit arrangements, as well as
seeking solutions towards a more cohesive
global employee benefit platform.
Multinational pooling of employee
benefit risk presents an opportunity
for organisations not only to provide
more efficient and cost-effective
solutions, but also to provide a more
consistent and cohesive control
mechanism for employee risk. This, with
an increasingly transient workforce,
provides organisations with a potential
competitive advantage in securing
and maintaining the workforce with
“employer of choice” credentials.
Emerging Risk
Cyber and environmental risk remain
at the forefront of challenges that exist
within the multinational segment, as
insurers continue to investigate and
develop products that are compatible
with global organisations.
In addition, through the continued
emergence of the global marketplace,
relaxation of import regulations, and
growth into new insurers, product
liability and supply chain risks
continue to provide challenges to the
multinational segment.
Contact:
Marc Clements
Multinational Practice Leader
Senior Vice President
+612 8864 8740
marc.clements@marsh.com

INSURANCE MARKET
CONDITIONS
Market Commentary
Captives have formed an integral part
of the risk-financing strategy of many
companies in the Pacific region for
several decades. Captives have been
utilised to manage premium volatility
over an insurance market cycle, and
can be particularly effective in harder
market conditions.
In general terms, favourable market
conditions in recent years have reduced
the effectiveness of captives, as the
low level of risk transfer costs makes it
less attractive to retain risk. However,
captives continue to be more effective in
complex industries where the ability to
transfer risks to the insurance market is
limited, or remains relatively expensive.
One of the key benefits of utilising
a captive as part of an overall risk-
financing strategy is its flexibility, as
market conditions vary from one year
to the next.
It is generally expected that if favourable
market conditions continue in 2014,
clients will retain less risk and buy more
reinsurance, as it remains more cost
effective to transfer risk.
Captives
Risk Trends
The Pacific region has a relatively
mature captive market. Singapore
is the most popular domicile for the
Pacific region. There is also reasonable
representation in other captive domiciles
such as Bermuda or Guernsey. We would
expect captive incorporations in 2014 to
continue to be concentrated in Singapore
due to its stable regulatory regime.
Risks currently underwritten by captives
in the Pacific region are mainly focussed
on property and, to a lesser extent,
casualty. Access to reinsurers continues
to be a key driver for existing captives and
this is expected to continue into 2014.
Contact:
Chris McGuinness
Senior Vice President, Captive Solutions
+61 3 9603 2881
chris.mcguinness@marsh.com

About Marsh
Marsh is a global leader in insurance broking and risk management. We help clients succeed
by defining, designing, and delivering innovative industry-specific solutions that help them
effectively manage risk. We have approximately 27,000 colleagues working together to
serve clients in more than 100 countries. Marsh is a wholly owned subsidiary of Marsh
McLennan Companies (NYSE: MMC), a global professional services firm offering clients
advice and solutions in the areas of risk, strategy, and human capital. With more than
54,000 employees worldwide and approximately $12 billion in annual revenue, Marsh
McLennan Companies is also the parent company of Guy Carpenter, a global leader in
providing risk and reinsurance intermediary services; Mercer, a global leader in talent,
health, retirement, and investment consulting; and Oliver Wyman, a global leader in
management consulting. Follow Marsh on Twitter @Marsh_Inc.

Marsh is one of the Marsh McLennan Companies,
together with Guy Carpenter, Mercer, and Oliver Wyman.
This document and any recommendations, analysis, or advice provided by Marsh
(collectively, the ‘Marsh Analysis’) are not intended to be taken as advice regarding
any individual situation and should not be relied upon as such. This document
contains proprietary, confidential information of Marsh and may not be shared with
any third party, including other insurance producers, without Marsh’s prior written
consent. Any statements concerning actuarial, tax, accounting, or legal matters
are based solely on our experience as insurance brokers and risk consultants and
are not to be relied upon as actuarial, accounting, tax, or legal advice, for which
you should consult your own professional advisors. Any modelling, analytics, or
projections are subject to inherent uncertainty, and the Marsh Analysis could be
materially affected if any underlying assumptions, conditions, information, or
factors are inaccurate or incomplete or should change. The information contained
herein is based on sources we believe reliable, but we make no representation or
warranty as to its accuracy. Except as may be set forth in an agreement between
you and Marsh, Marsh shall have no obligation to update the Marsh Analysis and
shall have no liability to you or any other party with regard to the Marsh Analysis
or to any services provided by a third party to you or Marsh. Marsh makes no
representation or warranty concerning the application of policy wordings or
the financial condition or solvency of insurers or re-insurers. Marsh makes no
assurances regarding the availability, cost, or terms of insurance coverage.
Copyright © 2014 Marsh LLC. All rights reserved.
For further information, please contact your local Marsh office or
visit our website at marsh.com

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