Heath Lambert issues its State of the Market Report 2008

Bobsfuide.com 12th February 2008 delivered a precis of Heath Lambert's (HL) State of the Market Report. It claimed that the cost of Professional Indemnity Insurance, (PI) was typically reduce by as much as 20% compared with predicted cuts of 10% -15%.

Many are now benefiting from their lowest ever rates, thanks to the abundant capacity, which is driving this extremely soft market.

The new capacity providers include Aspen Insurance, which has joined the fray with an established team from Mitsui. Despite this setback, Mitsui has recruited new underwriting staff and remains in the PI market. US insurer AIG is expanding its UK PI business to include construction and Bermudan based insurers are also expanding their appetites for PI.

In addition to fuelling more competitive prices, clients are benefiting in other ways too. For example, the availability of so much capacity allows clients to buy bigger limits. However, it is probable that rates will start to stabilise in 2008. This is partly because they are historically at very low levels, but also because it is unlikely that any new capacity will enter the market during the year.

By the end of 2007 some insurers were becoming more selective and trying to hold rates, although Aspen’s arrival in October has probably delayed any significant hardening of the market.

Cover

The soft market is leading to a range of improvements in cover. Underwriters are now much more likely to offer no claims bonuses and will often provide reinstatements at reduced additional premiums, or even for free. Deductibles have generally dropped below the normal one per cent of rateable fee income and we are now regularly seeing 0.5 per cent of rateable fee income for deductibles on larger risks.

Heath Lambert have also secured long term agreements (LTAs) for a number of our larger clients, now that such deals are more readily available and rates are so low. As well as locking in these low rates, LTAs offer the advantage that, subject to certain conditions, clients can look forward to an agreed renewal.

Yet further evidence that this is a buyers’ market comes from insurers’ more relaxed attitudes towards exclusions, such as bodily injury and property damage. Underwriters are even willing to consider providing cover for previously standard exclusions such as asbestos and toxic mould.
Concerns
Looking further ahead, one possible cloud on the horizon is the fall-out from the sub-prime mortgage crisis in the US. This saga may eventually have a knock-on effect in the UK in terms of mortgages and property valuations. Insurers have not forgotten that surveyors in particular, suffered during the last property market downturn due to questions over valuations.
Experts are already forecasting a rise in UK repossessions in 2008, so an increase in valuation disputes is a strong possibility. In response to these concerns, PI rates for surveyors are bucking the otherwise softer trend and showing signs of turning. However, this follows reductions in the October 2007 solicitors’ renewals fuelled by the arrival of new capacity.

The concern over surveyors demonstrates that PI is a specialist area requiring expertise and experience. It is not a general insurance or an extension of other covers such as employers’ liability or public liability. Most firms need bespoke coverage designed by people who understand the exposures and the PI insurance market. This is where Health Lambert’s experienced PI team can help.

To read the full account, please click on the link below:
http://www.bobsguide.com/guide/news/2008/Feb/13/Heath_Lambert_issues_its_State_of_the_Market_Report_2008.html