AUSTRALIA Trends and Developments Contributed by: Michael Polorotoff, Jeremy Peck, Emily Daffy and Scott Cowell, Moray & Agnew
Introduction Australia is a federation of states and territories bound together by the Australian Constitution. It has an over- arching federal system of government with its own courts, although each state and territory within the federation has its own system of government and courts. Like most countries that formed part of the British Empire, Australia’s system of government is modelled on the Westminster system, and an independent judi- ciary is a central hallmark. Australia’s legal system was also inherited from English common law. Insurance and reinsurance law are no different, albeit there have been statutory and regulatory modifica- tions, including the enactment of the Insurance Con- tracts Act 1984 (Cth) (ICA) and the Corporations Act 2001 (Cth). The ICA aims to strike a fair balance between the interests of insureds, insurers and other members of the public, and to ensure that provisions in insurance contracts and the practices of insurers in relation to such contracts operate fairly. The Australian insurance industry continues to grap- ple with many evolving challenges and opportunities, including the following. • The bedding down of another soft market, with increased competition and capacity forcing down- ward pressure on rates and more favourable terms for insureds. • The sustained enforcement focus by the corporate regulator (Australian Securities and Investments Commission; ASIC) and the prudential regulator (Australian Prudential Regulation Authority; APRA) in relation to misconduct and governance issues. Particularly, ASIC remains very active in pursuing its enforcement priorities. It has unveiled private credit practices, financial reporting misconduct, insurance complaints and claims handling, and misleading pricing as key enforcement outcomes for 2026. Of note, the blast zone from the Shield and First Guardian debacle continues to expand. Further, as the baby boomer generation transitions into retirement, there is increased scrutiny of the superannuation industry to ensure that superan-
nuants’ benefits and account balances are not adversely impaired. • Technological developments (specifically, the advent of artificial intelligence) causing disruption and uncertainty in many parts of the Australian economy, which in turn presents new opportunities and challenges for the insurance industry, espe- cially for high-volume/low-value claims. • The High Court of Australia reviewing the law, which affects or has the potential to affect the casualty line of business, especially in the areas of non-delegable duties of care and personal injury loss damages. Historical abuse claims remain a fertile area for claims activity. This article provides a high-level snapshot of some key issues and the likely trends and developments facing industry participants and various lines of busi- ness. Directors and Officers Side C At the risk of tempting fate, the Side C space in Aus- tralia is somewhat of a “good news” story for publicly listed companies and their insurers. Despite findings of contravening conduct in some cases, at the time of writing this article, no Australian shareholder class action has yet resulted in an award of damages for the investors. This has arguably translated into a cultural shift in mindsets, with: • insureds and their defence counsel being prepared to assume the litigation risk and run these cases to judgment – however, some of these cases are on appeal, including the Worley litigation and the CBA/ Zonia & Baron decision; • insurers being willing to offer Side C cover, albeit with significantly higher retentions absorbing the significant defence costs expenditure incurred in defending securities class actions – experience suggests that the defence costs spend will con- tinue to increase; and • plaintiff law firms and litigation funders being less willing to prosecute and finance securities class actions given, in particular, the serious difficulties faced by plaintiffs in establishing causation and loss with a cogent evidentiary footing. Of note, the rate of new Side C filings is not accelerating, with
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