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COVID-19 disrupting US professional liability market: AM Best

20th November 2020 - Author: Katie Baker

Rating agency AM Best has released a new report showing how the COVID-19 pandemic has created disruption for underwriters in each of the US professional liability insurance market lines.

am-best-logoEarlier this year, after the initial pandemic surge in the US, AM Best had placed a negative rating against the professional liability insurance segment.

This segment wrote approximately $35.8 billion in direct premium in 2019, using the sum of other liability and medical professional liability lines direct premium totals as a proxy for professional liability.

However, only two-thirds of respondents placed the severity of COVID-19 on D&O at the highest levels.

AM Best says the pandemic has increased pressure on D&O renewal pricing, and has resulted in hardened rates, with more than half report hikes of more than 20% and more-restrictive terms and conditions.

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Survey results show how the MPL line has been impacted severely by the pandemic, with market participants reporting capacity challenges.

However, the degree to which the pandemic ultimately affects the MPL market will take time to determine, given the length of time typically seen before a malpractice lawsuit is filed, followed by slow movement through the judicial system.

The pandemic has further pressured EPL claims, ranging from enforcement of health and safety standards for employees to an increase in wrongful termination suits. Nearly half of survey respondents reported a tightening of terms and conditions.

Given the awareness of cyber hazards, particularly with a remote working environment since the onset of the pandemic, pricing for cyber has been rising.

Overall, according to the report, cyber insurance remains a relatively small portion of the overall commercial insurance market.

Sridhar Manyem, director of industry research, AM Best commented, “Even before the pandemic, professional liability insurers were reporting varying degrees of market pressure, capacity limitations, changing risk profiles and price increases.

“COVID-19 and the subsequent lockdowns, travel bans and event cancellations, as well as the economic turbulence, have put considerable added pressure on professional liability insurers.”

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