As the dust settles on another professional indemnity insurance (PII) renewal season it’s an opportune time to reflect on how the market performed for the legal profession in England and Wales this year.
There was much talk of a hardening market, however the reality for many firms would have been consistent primary layer pricing with healthy levels of competition among good quality insurers. Established markets continued to adopt a sensible approach in an attempt to maintain current levels of premium for their better performing firms, indeed many firms may have seen a rate reduction this year.
Savings were available in particular for firms that could evidence a robust risk management structure and a good or improving claims position. If firms were seeking significant premium reductions then these may have been available at the expense of continuity by moving to a new insurer. It is often easier for a new underwriter to see an opportunity to provide premium savings if the incumbent insurer is entrenched in historic claims issues. On the flip side, firms that had experienced recent paid claims or increased reserves found a firmer approach from their insurers. A discipline in underwriting was evident with some insurers that perhaps has not been seen in the past.
In terms of individual insurers, this year we saw the departure of Lloyd’s of London backed Libra Managers, who provided cover to 20 of the Top 200 Law Firms. This was partly due to the significant losses suffered by Lloyd’s across all classes of business. We also seen the broker facility backed by XL effectively entering ‘run off’ as they prepare to exit next year. It is widely known that XL will not be offering renewals terms in 2019 requiring an enforced change of insurers at that point, so many firms chose to move now rather than wait until 2019 when they may have been viewed as a distressed purchaser.
Zurich continued their strategy turnaround which has seen them depart from the larger firm market and focus on small practices, providing some much needed choice at the lower end. It’s an interesting shift in risk selection and perhaps not surprising given the disparity in rates on annual turnover ranging from 6.3% for a sole practitioner to less than 1% for the Top 100. Aviva continued to grow their book based solely on an appetite to underwrite firms with income greater than £10m. Most of the other major insurers were predictable in their approach and would have maintained their market share with Travelers and QBE the largest insurers in the market once more.
We did see some additional capacity this year in the shape of Omnyy, a Managed General Agency (MGA) underwriting on behalf of Lloyd’s. Having made tentative steps last year, there was a concerted effort seen this year, writing competitively to secure market share and offering terms on a broad spectrum of partner size and areas of work profiles.
Multiyear and extended periods were again on offer from some insurers although not without exception. Certain underwriters were not offering anything beyond 12 month periods due to the uncertainties around Brexit.
The notable issue this year was undoubtedly the ‘Top Up’ market which hardened markedly. Underwriters were pushing through increases across the board and there is the prospect of further rises to come in 2019. The Top Up market is dominated by Lloyd’s syndicates many of which have had to submit actions plans for loss making PII portfolios to Lloyd’s satisfaction otherwise it will not allow the class to continue to be written in 2019. As a result of which, some Top Up insurers were pushing through premium increases of approximately 25%.
Many observers are predicting that this could be the first real sign of the hardening market some had predicted and that the primary layer market may toughen up in 2019. Only time will tell if this is a reality or whether the primary market will continue to be competitive in 2019.
In our view, with some uncertainty on the horizon, choice of insurer takes on a greater significance. Meeting with your underwriter and keeping them informed of all the positive things happening in the business can only benefit your business. The winners in the marketplace this year were again the firms that put the effort into the process and set themselves apart regardless of where we are in the cycle.
For more information on this article, please contact Grant Lister on 01943 660808 or firstname.lastname@example.org