The professional indemnity market landscape is changing, and in some cases changing very quickly. Professional services firms have enjoyed a long period of soft market conditions with rates and premiums, for some firms, reducing year on year. This has been due to an abundance of capacity in the professional indemnity market, which has resulted in competition for business between insurers, keeping rates low.
So, what’s happening in the UK law firm market for 11+ partner firms?
The primary layer (compulsory £2 million or £3 million limit of indemnity) for 11+ partner firms is showing signs of hardening, but remains a competitive marketplace for well-run firms from a risk management perspective and a good claims history, with a number of insurers continuing to operate in this space. However, the first layer above the compulsory limit and up to £10 million is particularly volatile, with significant rate increases for the entire profession. Historically, a fairly small pool of insurers have written these layers, but in recent times we have seen a number exit the E&W solicitors professional indemnity market and this lack of capacity means rates are increasing.
Another important change is for firms looking at policies longer than a 12-month period. In the past, insurers were prepared to offer premium incentives to ‘lock in’ for a longer period or cap the self-insured annual aggregate excess over an extended period, but these are no longer being offered and we are starting to see, certainly from the excess layer market, surcharges being applied to longer policies due to the uncertainty in the market.
How can you prepare for a hardening market?
- Submit your proposal form in good time: This enables your broker maximum time to negotiate with the market is paramount in hardening conditions
- Do not rely on the proposal form and claims experience as your entire submission to the market: Insurers are focusing on how you manage risk as a firm and what policies and procedures you have in place. Full details of how you manage risk should be included in your submission
- Review your claims experience with your broker and insurer: Work with your insurer to agree to close any matters you feel are no longer active. Ensure that your claims experience provides an accurate reflection of your firm
- Meet your primary insurer: There is only so much information an insurer can gather from a renewal submission. Allowing your insurer to understand your business better and comprehend how you manage risk will provide a more accurate picture, rather than simple reliance on your proposal form. In these changing times, it is also highly advisable to explore alternative primary markets and ensure you have a backup plan.
- Review your primary limit: With regards to excess layer rates increasing on layers up to £10 million, consideration should be given to asking your broker to look at options for an increased primary limit to alleviate this potential problem area
The key to guiding your way through a changing market is to present yourself to the market in the best possible way and working closely with your broker to achieve this.
For further information, please contact:
Kevin Hood
Executive director, Willis Towers Watson
T + 44 (0)20 3124 6771
M + 44 (0)7793 388 049
E kevin.hood@willistowerswatson.com
Jonathan Burt
Account executive, Willis Towers Watson
T +44 (0)20 7558 9234
E jonathan.burt@willistowerswatson.com
