Insurers See Rising Professional Liability Exposure

Rate softening has begun to creep into the professional liability market, despite continued claims costs pressures, speakers at the recently held “Errors & Omissions” seminar hosted by the Toronto Insurance Conference (TIC) say. The seminar focused on E&O coverage, but expanded into the broader area of professional liability (PL), particularly coverages available for brokers, where speakers note that the overall trend is toward increasing competition among insurers. This, despite the fact that rising court case awards reveal a future of volatile loss exposure.

Over the most recent price firming cycle, brokers faced challenges in their own E&O purchases, specifically with rising deductibles. But, these changes reflected the realities of the marketplace, notes Rod Finlayson, executive vice president of CG&B Group. “In many ways we are just dragging ourselves into the 21st century.”

While results have improved for carriers writing PL lines, some segments still show rate inadequacy, the speakers observe. They also questioned the value of the increased competition currently emerging in the marketplace. “I’m seeing competition from regular markets,” notes Hugh Fardy, vice president, broker liaison for Encon Insurance Group. He expects that while “truly professional liability” writers may not move into Canada, more regular insurers appear to be moving into this market segment. And, some may even be tempted, because they have had some success in one specific line or industry, into thinking they should write a host of PL lines over a variety of industries, he adds.

However, claims costs in the PL segment continue to mount. Specifically, directors’ and officers’ (D&O) claims from publicly-traded companies facing shareholders lawsuits have made front-line newspaper headlines, with cases increasing in frequency within Canada. Notably, some insurance players in the Bermuda market are now “slashing and burning” D&O premiums to retain business, but this does not jibe with the claims coming down the pike, stresses Matthew Davies, Canadian manager for professional and media liability at Chubb Insurance Co. of Canada.