Clyde & Co’s second annual London Market Professional Indemnity Report, based on a survey of PI professionals across underwriting, broking and claims, has revealed a widespread optimism about market conditions for the coming months, tempered by wariness of macroeconomic and inflationary pressures on the horizon.
The survey, which took place in May, reveals that 88% of respondents said that they believe rates will continue to increase in the next 12 months, while a fair majority (61%), said that broad economic trends would affect the volume of PI business underwritten in the London Market.
Additionally, 81% of respondents said that they expect more new entrants, exits and consolidation in the marketplace in the coming months.
At the same time, 80% of respondents said that they expect the frequency of claims to increase in the next 24 months, while 68% expect the severity of claims to increase in the coming two years. 88% of respondents also said that rates will increase in the next 12 months.
The survey also showed that there is still strong appetite for writing PI business in the London Market, with 53% of insurers saying their appetite will increase over the next 12 months, and 44% believing it would remain at current levels.
The majority of respondents (86%), said that buyers would be able to maintain existing aggregate limits at their upcoming renewal. Respondents did note, however, that most carriers will reduce or restrict coverage for specific perils in the next 12 months, while increasing the offering for standalone, affirmative coverage.
Simon Konsta, Partner, Clyde & Co, commented: “These findings show a great degree of optimism in the London PI market despite increasing economic headwinds. While respondents overwhelmingly believe the frequency of claims will increase over the next two years, there’s confidence that the market has sufficient capacity and is at a satisfactory level in terms of rates to weather any coming storms and remain both a competitive and respected hub for PI risks.
“The fact that the majority – 86% – of respondents said that buyers would be able to maintain existing aggregate limits at their upcoming renewal is also key; professional services firms need significant limits in current conditions and a stable market to provide them. Respondents, as well as buyers of PI coverage, will have an eye on inflation levels as we move past the most recent renewals.”
Lastly, many respondents also noted that the impact of COVID-19 on the claims picture may turn out to be less severe than first feared, but the on-going legacy of the pandemic and changing ways of working are still having an effect.
While hybrid working patterns have been broadly welcomed, there is a degree of caution that changes to working habits might make it more difficult to build and maintain relationships – something which has hitherto been vital for the London Market in particular.
Konsta, added: “While respondents clearly expect claims to rise in the next two years, they remain broadly optimistic about discipline in the marketplace. The market remains confident but wary of larger trends, such as the economic environment and the impact that changing working patterns may have on its ability not only to build and maintain networks but also to attract and retain employees against the backdrop of the insurance industry’s continued war for talent.”
