Carriers in the London market have “strong” appetite for professional indemnity (PI) risks but rates are expected to harden with double-digit increases this year, according to a survey by law firm Clyde & Co. Some 75% of PI insurers polled said rates will continue to rise in 2022, but this drops sharply to just 6% who think rates will harden further beyond the end of next year.
Two thirds of insurers said PI rates will increase above 15% this year, with one third expecting to push through rate increases of more than 10%.
Almost all carriers (94%) said they plan to write the same (48%) or more (46%) PI business during the next 12 months, found the survey of 122 London market insurers and buyers.
PI buyers are braced for higher rates and changes to coverage. All buyers surveyed said their premiums are likely to go up. Some 94% said cover will be more restricted for specific perils on renewals, and 46% said they expect to see a reduction of non-core PI cover. Buyers are already reporting changes in PI cover terms, with 35% facing higher deductibles, 29% noting reductions in cover and 24% seeing more exclusions in their renewal policies.
“Many brokers are still working to complete placements that in previous years would have been straightforward,” Clyde said. Only 52% of insurers surveyed said buyers will be able to renew existing policy aggregates and 40% said they will not be able to renew at the same level.
At the same time, 95% of insurers said the number of PI claims is expected to rise during the next two years, with 67% thinking they will be more severe. Some 24% of buyers have booked more PI claims during the past 12 months, the survey found, while 41% of buyers expect more PI claims and the size of losses to increase in the next two years.
The majority of insurance market respondents (83%) think there will be further PI market disruption and expect new entrants, exits and consolidation in the PI sector. Meanwhile, 39% said they expect more PI business to be written through MGAs, binders and delegated authority during the next two years.
Simon Konsta, partner at Clyde & Co, said: “[The fact] that appetite is strong despite the challenges being faced should give the market a lot to think about as it confronts renewal season. Neither buyers nor carriers have any doubt that claims are set to rise, but there is broad agreement that London is well placed and has the appropriate capacity, competitive rates and robust claims functions to preserve its position as a preeminent international hub for PI risks.”