Today’s volatile economic climate, driven largely by sustained increases in oil prices and their knock-on effects across global supply chains, organisations are being forced to challenge long-held financial assumptions.
One area that remains consistently underestimated, yet critically important, is the adequacy of insurance programmes, particularly sums insured and limits of liability.
“Insurance programmes should never be static but must evolve in step with the economic environment and, more importantly, with the true value of the assets and risks they are designed to protect,” explains Norbert Cordina, Chief Officer Operations at Antes Insurance Brokers.
The real cost of rebuilding
Rising oil prices have had a far-reaching impact. Higher energy costs have driven up the price of raw materials, transportation, and labour. These cost pressures feed directly into construction and reinstatement expenses.
In Malta, this trend is clearly reflected in construction costs. While the Construction Price Index (CPI), as reported by Eurostat, has stabilised in more recent periods, it has increased by approximately 40% over the past decade. As at June 2025, the Index stood at 120.30, highlighting the significant upward shift in baseline rebuilding costs.
Against a backdrop of persistent inflationary pressures and economic uncertainty, this elevated cost base means that reinstatement values remain materially higher than historic levels and continue to warrant close scrutiny.
“Many organisations underestimate how quickly replacement costs can move. If your sum insured does not reflect today’s reinstatement cost, you are effectively underinsured and in the event of a loss, this can trigger the application of average, materially reducing claim recoveries,” adds Cordina.
The consequences can be significant. Following a major loss, businesses may be forced to inject additional capital precisely when liquidity is already under strain.
“Discipline and regular review are very important and property valuations should be revisited periodically and aligned to current market conditions because reliance on historic figures is no longer sufficient in today’s environment.”
Limits of liability: Fit for today’s risk landscape?
While property values are a visible concern, limits of liability present an equally material challenge. Whether considering public liability, product liability, or professional indemnity, limits must be assessed against realistic exposure not legacy purchasing decisions.
“Limits should never be driven by what was bought last year or what feels comfortable. They must be informed by a clear understanding of an organisation’s risk profile.”
In an increasingly litigious environment, coupled with rising legal costs and settlement values, insufficient limits can expose businesses to severe financial shocks.
“A single large claim can easily exceed primary limits. This is why stress-testing exposures and, where appropriate, exploring higher limits or layered insurance structures is essential,” adds Mr Cordina.
Rethinking the role of excess
Many organisations continue to favour lower excesses to minimise out-of-pocket costs following a claim. While intuitive, this approach is not always economically sound.
“There is a common assumption that a lower excess equates to better cover. But in practice, this often results in higher premiums and the submission of smaller claims that deliver limited real value.”
Claims also carry costs beyond the settlement itself such as management time, administrative effort, and potential long-term impacts on claims experience.
“Every claim has both visible and hidden costs and once these are considered, the benefit of recovering smaller losses often diminishes.”
A more strategic approach: Retaining the right risk
Rather than focusing on minimising excess, Cordina advocates a more strategic allocation of risk.
“Organisations should retain a level of loss they can comfortably absorb. By selecting a higher excess, premium spend can be redirected towards higher limits and broader coverage. This is where insurance delivers the greatest value.”
This approach reinforces the core purpose of insurance: protection against material, unexpected events, not the financing of routine losses.
“Smaller losses can often be managed more efficiently internally, allowing insurance to respond where it truly matters.”
Speed of recovery matters
An often-overlooked consideration is the speed at which an organisation can recover following a loss.
“In many cases, operational continuity is more critical than the eventual settlement of a claim. Reliance on insurers for low-value claims can introduce delays at precisely the wrong moment. By retaining higher excesses, organisations can act immediately and fund repairs or replacements without waiting for claims processes to conclude.
“This agility can be decisive, particularly in protecting customer relationships and minimising business interruption.”
There is no one-size-fits-all solution. Each organisation must assess its own risk appetite, financial resilience, and operational priorities. However, the message from today’s economic environment is clear: now is the time to reassess.
“Ensuring that sums insured and limits remain adequate is not a technical exercise but a cornerstone of financial resilience. Equally, organisations should challenge traditional thinking around excess. The objective is a programme that is both robust, efficient and that responds when it truly matters,” concluded Cordina.
