Some useful comments from Clyde and Co on the professional indemnity sector;
Global law firm Clyde & Co’s latest annual survey of the UK PI market, A national market: consolidation, stability and growth, carried out with more than 60 insurers in late summer 2023, reveals that despite concerns over the macroeconomic and geopolitical climate, insurers in the sector remain confident heading into 2024.
A significant majority (95%) of UK PI insurers in the United Kingdom expect their organisation’s appetite for PI business to increase or remain the same over the coming year, despite a flat or negative economic outlook and an expected increase in claims volume.
Insurers reported that they felt an improved sense of stability in the UK PI market, with respondents expressing confidence in the levels of available capacity and a clear expectation that buyers will be able to maintain existing policy limits. The appetite to underwrite PI business remains high across the sector notably for miscellaneous lines and other areas that perhaps ten years ago might have been considered distressed.
Respondents highlighted that the availability of PI to professionals operating in areas where there are traditionally a high volume of claims is critical to the UK economy and essential in ensuring the accessibility of professional advice to those who need it.
Rob Crossingham, Partner at Clyde & Co, noted: “There is clearly a strong appetite for PI business across the United Kingdom, despite the macroeconomic and geopolitical backdrop. The survey showed really encouraging signs about the professionalism and stability of the PI market – nationwide – which will be hugely important for the UK economy as we navigate uncertain times.”
Old and new risks driving rising number of claimsPI insurers identified several clear challenges ahead, notably recessionary pressures, claims inflation and increasing cyber risks as well as new challenges arising from ESG and Artificial Intelligence.
The proportion of respondents who identified the use of AI by professional services firms as a concern (70%) has almost doubled since the 2022 survey highlighting the potential downsides of new technology as well as the significant upsides.
But while a large proportion of respondents believe that the frequency (83%) and/or severity (71%) of overall claims will increase in the next 24 months, the market appears confident in its ability to weather this with a pro-active approach to risk management. As they have done in previous years insurers reported that they continue to review their wordings regularly, and a significant proportion said that they expected their underwriters to navigate known exposures by restricting cover for specific perils.
Regional hubs demonstrate market strength
This year’s report also highlighted the growing trend for the development of UK regional insurance centres outside of traditional London headquartered operations driven by improved technology, flexible work patterns, cost effectiveness and a growing appetite among clients for a regional solution to their needs.
Among those cities where there has been significant growth in recent years in terms of a PI ecosystem are Bristol, Birmingham, Leeds, Manchester, Edinburgh and Belfast.
Louisa Robbins, Partner at Clyde & Co based in Manchester, commented: “There has been sustained growth, and an increased importance, in the number of regional hubs outside of London, focusing on both underwriting and claims. The vibrancy of these nationwide centres of excellence will not only continue to strengthen the UK PI market overall but go some way to address the challenges of closing the talent gap and increasing diversity, inclusion and equality in the UK PI sector.”