Professional indemnity insurance original pricing remains stable, with occasional rate increases where premiums have been maintained on a reduced fee income or on those accounts impacted by adverse loss experience.
UK lawyers renewing at the common renewal date of October 1, 2011, saw a reallocation within the assigned risk pool hierarchy, indicating a keen appetite among the lead insurers.
The level of fraud coverage provided within the original policies and/or professions “minimum terms” wordings continues to be of concern to insurers and reinsurers alike.
The claims-made nature of this class in the United Kingdom and in all European territories except Germany, Austria and Switzerland continues to attract new entrants. This is particularly true where insurers are wary of long tail exposures but have a desire, indeed often encouraged by regulators, to achieve diversification within their account.
Professional Indemnity Reinsurance
Reinsurance pricing remains relatively flat with capacity for this class increasing. For those accounts not impacted by the recession or stock market volatility it is possible to obtain rate reductions. The one exception is reinsurance of financial institutions, where new reinsurance capacity is not readily available, particularly for new entrants. Reinsurers remain very wary of the systemic and volatile loss potential inherent within this account.
Directors & Officers Insurance (D&O)
Private company D&O remains fiercely competitive with the continual expansion in the number of insurance carriers and original policy coverage. Commercial D&O is also competitive but to a lesser degree, most notably where there is exposure to US securities. Risk managers, under pressure to secure premium savings, are mindful of the difficult economic environment in which they operate.
Reinsurers are cautious in their approach to financial institution D&O reinsurance due to the potential impact of the sovereign debt crisis in Europe and the general contraction in the world economy.
For those accounts without financial institution exposure, reinsurance pricing remains flat with occasional rate reductions for those accounts without US securities exposure. With the exception of financial institutions, the results are seen as severity rather than frequency-driven. For this reason, while loss experience is taken into account on both private and commercial accounts, the increased limit factors used to rate excess of loss programs can be severe. Many reinsurers have a preference for pro rata reinsurance due to the inherent difficulties present in excess of loss pricing for this class of business.