Analysts at Fitch Ratings highlighted how results for the US medical professional liability insurance (MPLI) market improved significantly in 2021, reversing a four-year trend of weakening performance, but still, however, generating a 108% combined ratio.
Segment performance is expected to further improve in 2022 due to earned premium growth related to recent material premium rate increases.
However, analysts noted that a return to underwriting profitability is less likely given the challenges derived from the competitive nature of the MPLI market, uncertainty on incurred loss experience from economic volatility, higher inflation, and any post-pandemic revival of litigation activity.
Moreover, net written premiums grew about $10 billion in MPLI in 2021 after a 10.4% annual increase, far above the 4% average over the prior three years.
Analysts noted that a recent deceleration of rate increases in MPLI, among other liability lines, adds concerns whether pricing can keep pace with loss cost trends.
In addition, courts are returning to full operation following the COVID-19 pandemic. Analysts also pointed towards both social inflation and high general inflation as reasons for loss-severity uncertainty.
Meanwhile, demand for MPLI is also expected to drop due to the ongoing consolidation within the healthcare industry.
Analysts citied a study from the Physicians Advocacy Institute which found that percentage of US physicians working for hospitals or corporate entities rose to over 69% in January 2021, compared to 62% in January 2019.
The ratings agency also noted that larger MPLI writers are adapting by expanding product offerings, and services toward media facilities, however, many smaller regional carriers lack the expertise and capacity to move beyond physician coverage.
Over 55% of premiums are from specialty MPLI-focused underwriters with limited geographic scope, or opportunity to deploy additional capital outside of MPLI.
In addition, analysts added, that ProAssurance’s recent acquisition of NORCAL could also signify more mergers & acquisitions (M&A) activity in the space, likely there are still more active buyers than willing sellers among MPLI specialty writers.
