50 years ago this month, Neil Armstrong walked on the Moon. Unless you have been living on the Moon, you will know that the Professional Indemnity (PI) market has dramatically changed in the last year or so, leading to the toughest conditions for clients in the last 18 years.
So, what caused this to happen? And what can Miles Smith do to help you?
UK PI has not been a profitable line for business for insurers for many years, although some sectors within it perform better than others.
The focus of attention (and corrective measures) has largely been in the Construction field.
The trend for the changing market began with the tragic events at Grenfell. Cladding contractors (and associated professions such as architects and project managers) suddenly faced huge increases in premiums; higher excesses and narrower cover.
Risks which insurers thought were contingent (because the design element of the risk was subcontracted out) – and thus paid a very nominal rate – proved not to be the case as subcontractors’ own PI did not respond in the way expected; due to non-existence; non-renewal; ceased trading or inadequate Limits and/or cover.
Claimants also used a “scatter gun” approach against all the parties in the construction chain on the basis that one or more of the PI policies would respond, regardless of the individual Firm’s role and responsibility.
But the seismic change in the UK PI market came in the Summer of 2018. Following years of losses, syndicates and insurers finally woke up to the fact that unless they could turnaround their fortunes and write a profitable PI book, they could not continue as they had done before. Consequently, a number of markets withdrew from the sector, leaving those still remaining to take advantage of the much-reduced capacity, with higher prices and reduced cover, followed by some MGA’s losing their capacity providers.
A more disciplined underwriting approach also ensued, with subscription lines becoming the norm, together with a closer examination of an Insured’s risk management procedures.
For many account handlers, more used to PI premiums reducing every year, it came as a culture shock to suddenly being asked to sell a higher premium and harsher terms and conditions generally. Brokers learned very quickly that telling their construction clients that they had had it cheap for years did not really cut much ice in an industry with operates on notoriously thin margins.
Of course, some of us have been here before. We have seen hard markets and soft markets. We know that historically hard markets do not tend to last very long as the higher prices attract new investors. And some underwriters forget (at their peril) that brokers will always remember those insurers who deliberately take advantage of the situation, often with very little logic being applied.
So how can Miles Smith help you?
Our PI team has decades of experience and knows how to trade through the market cycles. We are fortunate to have our own in-house Facilities where we can provide quick solutions for Policy Limits up to £10m for around 70% of all enquiries received. And for those risks which are not suitable for our Facilities, we have full access to the Lloyd’s and London markets to assist with the more difficult to place risk.
And how long will this hard market last? No one knows – but observers believe it will last longer than a typical 12 months cycle; but it will certainly change before we go back to the Moon.
In the meantime, Miles Smith will be here to help; whether it is a simple risk or a more challenging risk – we will help you find the best solution during these difficult times.
Miles Smith’s professional indemnity team can provide cover for almost all classes of profession (other than solicitors and financial advisers).For more information on how we can help you secure more PI business, please visit our website. Or contact Nick Pauley on 020 7977 4911 or via email firstname.lastname@example.org