November 30, 2023
More Rate Reductions Expected for Professional Liability Coverages
It looks like the soft markets that started last year for Management Liability (ML) and Professional Liability (PL) insurance will continue to soften over the second half of 2023.
This is the result of new entrants to that market and increasing capacity, which will continue to stimulate competition and drive down premiums. This is the conclusion of a new report, “2023 US Management and Professional Liability Market Outlook,” by Risk Placement Services (RPS), a wholesale insurance broker and managing general agent. The report examines and provides insights into the current state of the professional liability sector.
Commenting on the report in a webcast, RPS Executive Vice President for Executive Lines Manny Cho said, “The management liability and professional liability market as a whole is still a challenging sector …. Even if affordable coverage is not hard to come by and customers are happy with the rates they’re being presented with, there are nuances and differences of coverage that really need to be paid attention to.
“This is probably the most unique market that we’ve been in in quite some time,” continued Cho. “We have a confluence of a lot of different things coming together that is really causing soft market conditions on almost every single line of business. And then we also have economic conditions that are putting pressure on our lines of business because of the hardening or reduced capacity and increased pricing in other lines of business such as property.”
Cho went on to speculate that rate reductions in various professional liability coverages could be “anywhere from 10 to 20 percent” during the rest of 2023. But that doesn’t necessarily make it an easy market for brokers and agents to operate in, and with price no longer being the differentiator it used to be, agents need to look at other areas to ensure they’re delivering the best for their clients, while also protecting their own books of business in a shrinking market, according to the report. According to a report in the brokerage publication ALM Property Casualty 360, some of the major takeaways of the report are:
- For D&O, the average renewal premiums are now at between 20% and 30% of the previous year’s price. “It is truly again a buyer’s market,” RPS Senior Vice President Rodney Choo said.
- In employment practices liability, premiums have stabilized and most renewals without a difficult claims history are now seeing flat rates, according to RPS Area Senior Vice President Dave Tardif.
- Fiduciary lines are no longer an overlooked coverage, according to RPS Area Vice President Jack Rosen. This is due to a changing claims landscape: “A coverage that used to be a throw-in is now facing substantial litigation, and as claims frequency goes up so do rates.”
- The architects and engineers sector is seeing most renewals coming in at a flat rate, but “the majority of carriers are still limiting the amount of capacity [limits] that they will put up for any one firm,” says RPS Senior Vice President Ron Kiefer.
“Almost every market we operate in is in a very competitive market situation, with high levels of capacity and good rates and good terms and conditions available,” Cho concluded. This makes it a difficult market for brokers, and it is in times like these that partnerships come into their own.”