Less capacity to drive up rates as Loyd's syndicates cut back or pull out of PI.
Rates are set to harden in the professional indemnity (PI) market, according to Manchester Underwriting Management chief executive officer Charles Manchester.
He said the reason for the increasing rates was that many of the Lloyd’s syndicates that traditionally have been writing PI business are cutting back or completely pulling out of this area of the market.
“Lloyd’s mandated this summer that there are some classes of business that are on their list of business lines that are losing them money and this includes PI,” Manchester told Insurance Age.
He added: “They want every syndicate to report back on their decile 10 [the bottom ten percentile of their business] and what they’re going to do to remediate it and if it lacks credibility they’re going to get told to close it down.”
Manchester warned that brokers would see PI risks go up in price as a result of there being less capacity in the market and that this line of business will become more difficult to place.
He continued: “It’s been coming for a long time, the soft market has gone on for 15 years and every year prices have gone down. At some point it’s going to catch up with you.”
In addition, brokers that sell PI insurance noted that while they had not yet seen rates go up, they would not be surprised to see it happen.
Paul Beck, director of Amicus Insurance Solutions, said he suspected rates would be going up before too long, adding: “It might be in a couple of weeks’ time when we start seeing the January renewals come through.”
Amicus specialises in construction and Beck noted he had seen a change of approach from some insurers and managing general agents in this area of the market.
“A lot of the liability insurers used to throw in a little PI with their public liability insurance at small limits, but we’re seeing less and less of that,” he argued.
“You have to buy PI as a standalone offering now, and that’s been happening probably in the last three or four months.”
Neil Campling, CEO of ICB Group, stated there had been whispers in the market about PI rates being set to harden.
“I know Lloyd’s has been fairly tough on a number of the syndicates with their plans for 2019 and at the moment I’ve only heard that by way of rumour, but you can understand there’s some logic behind it,” he added.
Similarly to Beck, he expected to see a change in the market at the start of next year and highlighted that this was good news for brokers as it created more opportunities.
Manchester echoed this idea, noting that brokers will be likely to make more money but adding that “they’ll have to work harder for it”.
In addition, both Manchester and Campling flagged that hardening rates could lead to underinsurance in the market with people buying lower limits of indemnity and taking increased deductibles.
Campling concluded: “That’s generally the reaction and there’ll be more shopping around, although you don’t ideally want to chop and change your PI cover. People will want options.”
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