UK professional indemnity market softening at worrying rate

The UK professional indemnity (PI) market is softening at a worrying rate – and could even approach levels last seen in 2018, a period that prompted the Lloyd’s ‘Decile 10’ initiative, which was designed to address any deteriorating underwriting performance in Lloyd's syndicates and resulted in capacity being pulled from many, including a number of PI writers.

That is according to Joanne Healy, senior underwriter – Professional Indemnity at Markel International. Speaking to AIRMIC Today, she said that the market is responding to challenging times as economic and geopolitical upheaval coincide with high levels of capacity in the market.

“It has led to something of a perfect storm,” she said. “There has been a lot of capacity entering, a lot of it via MGAs, at a time of volatility. There is not always the recognition of the length of the tail in this market, which can be as long as ten to thirteen years. We are not there yet, but if rates keep reducing the way they are now, we will be approaching 2018 levels.”

She said the market became attractive to new carriers through the hard market, when it posted solid results. It also offers good diversification for newer players more focused on short-tail lines. “We understand the dynamics of supply and demand, but for a market to spike and then drop is not good for anyone.”

She said Markel’s message to clients was to consider the value of long-term partnerships and be patient. “We pride ourselves in being able to adapt, combine products and be there to pay for claims. The market should be doing the same, but it is very challenging at the moment. And the worry is that even more entrants are in the wings. We understand Lloyd’s is managing the requests of new entrants.”

She stressed that demand remains high but said it was important that the bigger carriers hold the line and try to avoid levels dropping towards what they were in 2018. “From a risk exposure standpoint, the risks are evolving very quickly. “AI is a big driver at the moment, but we want to work with clients to communicate what they're seeing and how they want their product to look, so we can look at the risk exposure involved with that.”

In 2022, in partnership with Gallagher, Markel launched a PI product specially for UK universities. Since then, it has become a market leader in this space. “We recognised an opportunity with some of the leading UK universities and created a product to address what they needed.” It has also since extended the offering to cover crime and D&O. 

But she said there are also challenges in this space. “Unfortunately, the financial stability of these institutions is quite difficult.  Inflation, coupled with the universities’ inability to raise fees over the years, has escalated the financial pressure being seen across the sector. We're waiting to see how the landscape pans out but, in the meantime, my direct message to all our partners, universities, accountants, lawyers and clients is to continue working and engaging with us as we navigate these times together.”

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