Medical professional liability reinsurance rates remained flat year-over-year for working layers and high-risk excess programs. A strong primary market contributed to this trend, along with increased cedent retentions relative to 2010 (and, for that matter, 2009). There was ample capacity available at the January 1, 2011 renewal to meet cedents’ needs.
Rates are down 5 percent year-over-year for medical professional liability insurance, with claims frequency hitting record lows and carriers realizing higher profits. This environment promotes underwriting discipline for long-tail lines of business among carriers, since they cannot engage in “cash flow underwriting.” This is reflected in loss ratios for the industry, which are running in the 60 percent range (again, record lows). Continued underwriting profitability is expected through 2011.
As a result of loss reserve redundancy and premium adequacy, merger and acquisition activity continues to be robust in the primary market, with two major transactions in 2010.
Claims frequency has fallen more than 40 percent since the early 2000s, with no indication of measurable increases noted to date. Base premiums are down approximately 5 percent from last year, due largely to base rate decreases and the increased use of rating credits. The principal challenge to the market is the prospect of implementing the new health care program that passed the US Congress in 2010. Carriers believe the legislation will subject them to additional exposure and liability, while also resulting in a smaller miscellaneous professional liability insurance market, as hospitals and large physician groups acquire smaller physician practices.