Why Hospitality Businesses Are Facing Higher Insurance Scrutiny in 2026

If your last renewal came with a steeper premium, tighter terms, or more questions than usual about your security setup, you’re not imagining it. Something has genuinely shifted in how insurers assess hospitality risk this year, and it’s worth understanding exactly what’s driving it before your next renewal arrives.

What’s Actually Changing

The industry-wide trend behind it

Insurer behaviour across the Australian market has shifted noticeably heading into 2026. Gallagher Bassett’s fourth annual Carrier Perspective: 2026 Claims Insights report, based on responses from 250 senior insurance leaders across Australia, North America and the UK and released in February 2026, found that premium affordability and insurability jumped from sixth place among Australian insurers’ top concerns in 2025 to first place in 2026. Respondents linked this directly to rising inflation, increasing climate-related losses, and regulatory pressure, all reshaping how premiums are priced and what risks insurers are willing to take on at all.

The same report found 70 per cent of insurers reported increased claim costs and frequency over the past year, and half of those surveyed said they plan to raise premiums in response. Many are also revising coverage limits and terms and tightening how they assess risk before offering cover, not just what they charge for it.

This is a market-wide pattern, not something unique to hospitality. But hospitality sits in a position where several of these general pressures land harder than they do elsewhere.

Why hospitality specifically is feeling it more

Based on what we’re seeing across our own hospitality placements, a few factors compound for venues in a way they don’t for most other business types, though we’d flag these as our own market observation rather than a published industry figure.

Later operating hours and alcohol service tend to be treated by underwriters as increasing a venue’s risk profile, while reduced trading hours, lower alcohol volumes, or daytime-focused operations tend to lower it. We’ve also seen venues with live music or extended late-night trading face steep premium increases at renewal in some cases, to the point where cover becomes genuinely difficult to place at a workable price for the highest-risk end of that spectrum.

Location-based catastrophe exposure is also a live factor, and this has become a particular issue for tourism and hospitality operators in cyclone- and flood-exposed regions, including parts of Queensland.

And there’s a targeted risk that’s genuinely new and specific to Melbourne. Since late March 2026, a wave of arson attacks, attempted arsons and related incidents has struck licensed hospitality venues, bars and nightclubs across the city. Victoria Police launched Operation Eclipse on 27 April 2026 to investigate the organised crime syndicates believed to be behind the attacks, with police reportedly linking the campaign to disputes over the illicit alcohol trade. As at early June 2026, police had connected 35 incidents to the operation, made more than 65 arrests, and laid over 350 charges. [This is still an active, moving investigation, so please confirm the current tally with Victoria Police or ABC News before publishing, since the figures above will likely be superseded by the time this goes live.] This is a targeted pattern rather than a general property risk, and it’s reasonable to expect insurers factoring it into how they assess malicious damage exposure for Melbourne venues in higher-risk categories, even where no incident has occurred at that specific venue.

The Specific Problems Insurers Are Concerned About, and What You Can Do About Each

Security and crowd management gaps

Based on our own experience placing hospitality risk, underwriters generally want to see evidence of effective crowd management and security, functioning CCTV, licensed security staff, and current incident logs, when assessing a venue. A venue that can’t demonstrate these clearly tends to present as a higher, less quantifiable risk, which can translate into higher premiums or more restrictive terms.

What you can do: Make sure your CCTV system is genuinely operational, not just installed, that security staff are licensed under the relevant state legislation, and that incident logs are current and easy to produce on request. Several state licensing regimes already require CCTV footage retention, commonly around 30 days, so aligning your insurance documentation with what you’re already required to keep for licensing purposes is often a low-cost way to strengthen your position at renewal.

Disclosure disputes at claim time

This is the one most venue operators underestimate, and a recent AFCA decision shows why. In 2025, the Australian Financial Complaints Authority ruled against insurer QBE after it denied a restaurant’s arson claim on the basis that the sole director hadn’t disclosed a prior criminal conviction. The restaurant had suffered an arson attack in August 2024, with the arsonist apprehended by police.

The actual basis for the decision is worth getting right, because the real lesson is different to what’s often assumed. The application had gone through a broker’s electronic platform linked to the insurer’s own systems, and QBE was unable to produce evidence, such as screenshots, of exactly which disclosure question had actually been put to the applicant. AFCA found there were two possible versions of the question that might have been asked, and one of them referred specifically to “the insured”, a company that had no criminal convictions of its own. AFCA held that the burden of proving non-disclosure sits with the insurer, and QBE hadn’t met it: it couldn’t establish which question was asked, and therefore couldn’t establish that the director’s personal history was actually required to be disclosed under that question. The insurer was ordered to reinstate the policy and settle the claim.

The lesson isn’t “don’t disclose”, it’s that an insurer has to be able to prove exactly what it asked before it can rely on non-disclosure to deny a claim, and a business is in a much stronger position at claim time if it kept its own copy of the actual proposal form and disclosure questions from inception, rather than relying on what a broker’s system might be able to reproduce years later.

What you can do: Keep your own copy of every disclosure question and proposal form at every renewal, not just at initial policy inception, and be specific in your own records about whether a question relates to the business entity or to individuals connected with it. If you’re ever uncertain whether something needs to be disclosed, the safer path is to disclose it and let the insurer confirm its relevance.

Malicious damage and arson exposure

Malicious damage is a standard insured peril under many Australian business insurance packages, generally sitting alongside fire rather than automatically excluded from it, though some policy wordings do restrict or limit it for certain higher-risk occupancies. The practical point isn’t that arson sits in some separate, harder-to-access category by default, it’s that the specific terms, sub-limits and any occupancy-based restrictions in your own policy are worth confirming directly rather than assumed either way.

What you can do: Confirm with your broker exactly how your policy treats malicious damage and arson, including any occupancy-specific restrictions that might apply to a hospitality venue specifically. If your venue operates in a precinct affected by the pattern above, it’s also worth checking whether your business interruption cover includes a prevention of access or denial of access extension, which can respond if a police cordon, a neighbouring fire, or another authority action forces your venue to close temporarily, even where your own premises weren’t directly damaged. This is often the more relevant protection for a venue near, rather than the direct target of, an incident.

Underinsurance on sum insured and business interruption

Rebuild and fit-out costs have risen sharply across the sector in recent years, and a hospitality fit-out is often one of the more expensive things to reinstate after a serious incident. 

What you can do: If your sum insured hasn’t been professionally revalued in the past two to three years, treat that as the trigger for a review, and specifically check that it reflects current fit-out replacement cost, not a figure carried over from a previous renewal.

Liquor liability, RSA compliance and security contractor licensing

A few further factors shape hospitality underwriting that are worth knowing about even though they get less attention than security cameras and disclosure. Liquor liability and patron injury exposure, claims arising from intoxicated patrons, service-related incidents, or injuries connected to alcohol service, sit alongside your standard public liability cover and are worth confirming are adequately addressed rather than assumed to be automatically bundled in. Responsible service of alcohol compliance, staff training records and documented refusal-of-service procedures can materially affect how a liquor liability claim is assessed. And where you engage contracted security staff rather than employing them directly, confirming that the security firm itself holds appropriate licensing and its own liability cover is worth doing at the outset of the arrangement, since a gap there can leave you more exposed than expected if an incident involving contracted security staff leads to a claim.

Where This Leaves Hospitality Operators

None of these pressures are things a single venue can control on its own: insurer risk appetite, regional claims trends and broader inflation are market-wide forces. But the factors within your control, accurate security documentation, precise and well-recorded disclosure, adequate liquor liability and contractor arrangements, and a current sum insured, are exactly what determines whether your business gets caught in the sharpest end of this repricing or manages to stay ahead of it.

Want a review of how your venue’s risk profile is likely to be assessed at your next renewal? Speak with Knightsbridge Insurance Group about your hospitality cover.

Important Disclaimer: This article provides general information only and does not constitute legal or financial advice. Hospitality insurance requirements, underwriting criteria, and coverage vary significantly based on individual venues, states and territories, and insurers. The AFCA decision referenced reflects the specific facts of that case and does not guarantee a similar outcome in other circumstances. Knightsbridge Insurance Group holds Australian Financial Services Licence 514855.

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