The PI Insurance Market
You may have heard this from your broker already, but the Professional Indemnity insurance market is hardening. Some underwriters are looking to charge higher premiums for lower levels of cover, and those that aren't are pulling out of the PI market altogether.
There are a few reasons for this, probably the major factor being 15 years of under-performance from underwriters' perspectives and this has been backed up by a Lloyd's of London market review which revealed that 62% of syndicates underwriting PI business were losing money on their PI books.
However, in 2017 there were a number of more immediate triggers that sparked the change in underwriters' attitudes, including the Grenfell Tower tragedy (bringing construction techniques into stark focus), the under-performance of waste-to-energy projects and technology, and an unusually high level of natural disasters across the globe including hurricanes and forest fires (which may not have been PI losses, but depleted cash reserves of insurers sharply).
Whereas previously an insurer may have underwritten a risk to maintain their market share, they are now looking to decline any risk which falls outside of their underwriting appetite.
This means a few things for you. It is very likely that you will see an increase in your premiums in the near future if you haven't already. To mitigate this as far as possible it will be crucial to tackle those PI proposal forms earlier than usual. Because of the premium increases across the board more brokers are marketing their risks and as a result underwriters' workloads are piling up, meaning it is taking longer to get quotes back from them.
It is also important to consider that the good underwriters are more selective in the risks they accept, which means they might be able to keep a premium competitive and cover wide but they are probably going to come back and ask for more information before they can offer it. The earlier the process is started the more chance you have of getting the right underwriter to be able to fully consider your risk.
When your renewal is presented make sure you consider that insurers are introducing additional exclusions to their policies which should be made very clear to you by your broker.
Another thing it will be important to do is review your current policy limits and excesses, and keep an eye out for insurers moving away from a limit for "each and every claim" to a limit "in the aggregate" for the year, which potentially can mean in the event of a catastrophic loss your PI insurance cover is exhausted until the next renewal. This is certainly another area we would expect your broker to discuss with you when obtaining renewal terms.
There are certain things you can do to reduce your risk to an underwriter, for example active supply chain management. Ensuring that all companies within your supply chain and all sub-contractors maintain their own PI insurance to the same limit as you will make it easier for an underwriter to look at your risk favourably and can help reduce premiums. In fact, some underwriters insist on this as a policy condition.
Hopefully this guide will offer a little insight into PI insurance from the other side of the curtain to help you when reviewing your own cover, but if you would like any more information feel free to get in touch, we will be more than happy to help.