You may have seen in our recent blog that our business insurance experts tackled the subject of “What does a ‘hard insurance market’ mean for business owners?” Below we have taken an even closer look at how the changing market is having a direct impact on two very important types of commercial cover – Professional Indemnity Insurance and Directors & Officers Insurance.
Professional Indemnity (PI)
A hardening market has made it difficult for some businesses to find suitable cover over the last couple of years. An insurance market is considered hardened when a cover is in high demand but suppliers are low. Major disasters, unexpected insolvencies and broken supply chains have contributed to a large increase in PI claims. The Grenfell tragedy and Carillion’s collapse made conditions for PI in the UK difficult, with many insurers deciding to no longer offer PI cover and focus on other products.
This increased volume of claims has meant that insurers have had to pay a hefty price, with a limited financial supply. Experts have estimated that because of this, half a dozen insurers have exited the PI market in the last year alone, with no new insurers taking their place.
The market has suffered from claims arising from recent tragedies, disasters and other professional negligence exposures. Because of this, insurers have had to increase the premium rates to ensure that adequate cover can be provided. As policies fall due for renewal, some insurers have imposed more restrictions on policies such as limiting cover to a single aggregate amount and imposing a higher excess, and removing some extensions.
Directors' & Officers' (D&O)/Management Liability/Trustee's Indemnity
With increased claims activity being seen across the world fuelling price increases, capacity reductions and cover restrictions, it’s fair to say that the D&O and wider Management Liability insurance market is entering an unsettled phase.
Insurers have seen a huge increase in claims especially with regards to employment, regulatory, contract and fraud issues. This hasn't been helped by the anticipated spike in Insolvencies and employment disputes resulting from the pandemic.
All of this has resulted in insurers reviewing their book of business, often resulting in a major change in underwriting stance including the increase of rates. There’s now a more selective appetite, which means that insurers are restricting the trades and industries to which they can offer cover and selecting lower risk trades. Some insurers are even withdrawing from the market completely, meaning that they are no longer writing this class of business, others are continuing but with much lower limits to decrease their potential loss.
SEIB have been operating for over 50 years, with a vast range of commercial business insurance experience. If you have any concerns over your business insurance, please contact our team on 01708 850000, or email firstname.lastname@example.org.