Menu

Reinsurance News

Underwriting losses continue for U.S Medical Professional Liability: Fitch

16th October 2018 - Author: Matt Sheehan

The U.S Medical Professional Liability Insurance (MPLI) sector has experienced underwriting losses for a second consecutive year, posting a combined ratio of 102% in both 2016 and 2017, according to a new report by Fitch Ratings.

loss chart

Calendar-year results in MPLI continue to benefit from favourable loss reserve development, which averaged 20% of annual earned premiums for the last 10 years, but Fitch observed that the level of reserve strength is declining.

“Favorable development levels from the most recent accident years that represent the largest proportion of all reserves have fallen noticeably,” said James Auden, Managing Director at Fitch Ratings.

Auden added that mergers and acquisitions (M&A) and consolidation activity could also pose issues for the MPLI market over time.

“Consolidation of hospitals and healthcare practices is shifting physician employment toward larger groups that are more likely to self-insure and use captive or alternative risk programs, which will reduce demand for primary MPLI coverage,” he explained.

MPLI is one of the smaller product segments in the U.S property and casualty (P&C) industry, and Fitch noted that its pricing and market performance tends to follow a different cycle than other commercial lines,

Historical periods of profit volatility in this line have generally been related to heavy litigation and the legal settlement cost component of MPLI claims.

A large portion of the MPLI market share is also held by specialty underwriters, who have limited expertise and underwriting opportunities to deploy capital outside of MPLI markets.

“Excess capital and underwriting capacity in MPLI is a significant hindrance to any improvement in pricing going forward despite recent deterioration in underwriting results,” said Gerry Glombicki, Director at Fitch.

There remains strong motivation for larger MPLI specialists to grow via mergers with smaller peers, but the recent growth in M&A deals in the P&C sector has had limited impact on the MPLI space.

Despite the ongoing performance issues, Fitch concluded that many MPLI specialists remain well capitalised and able to withstand considerable adversity going forward.

Print Friendly, PDF & Email

Recent Reinsurance News

Getting your daily reinsurance news from Reinsurance News is a simple way to receive only the reinsurance industry news that matters, delivered directly to your email inbox.

  • Only email is mandatory, but the more you tell us about yourself the better we can serve you in future!
  • This field is for validation purposes and should be left unchanged.

By submitting the form you are giving your consent to be emailed by us.

Read previous post:
Stonybrook creates new Ventures Division, led by Sandra Familet

Stonybrook Capital, an insurance sector-focused merchant and investment banking firm, has established a new Ventures Division and appointed Sandra Familet...

Close