Presentation: Risks in Underwriting Professional Indemnity Insurance in Europe

Risks in underwriting professional indemnity insurance: a European overview

Risks in underwriting professional
Bancassurance Models
indemnity insurance: a European overview

Around the World

3rd Annual Insurance Risk Management Forum
Vienna, 20th February 2014

© Finaccord Ltd., 2014

Web: www.finaccord.com. E-mail: info@finaccord.com

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Agenda
 A European cross-country comparison of professional risks
 The hospital / medical sector
 The architecture / engineering sector
 The legal services sector
 Risks emerging in non-traditional professions
 Future outlook



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General characteristics of
professional indemnity insurance
 Complex sector composed of a series of sub-markets
 Level of regulation is dependent on the perceived risk in each
professional segment
 Development of the market in Europe varies significantly in line
with legislation, insurance regulation and general legal culture
 High volatility in terms of claims and capacity in some segments



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The European market for professional indemnity
insurance by international comparison
Estimated market sizes in terms of GWP (2013)
USD billion
20.0
20

16

12
9.2
8

4
1.2

1.1
0.1

0
USA

Europe

Canada

Australia

South Af rica

Source: Finaccord reports on Professional Indemnity Insurance in Europe, Canada, Australia, South Africa, Insurance Information Institute,
Finaccord estimates


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Comparing different professional segments in Europe (1)
Segmentation by professional sector of the European market in terms of GWP (EUR million, 2013)

Accountancy
Other
prof essional and f inance,
412.0
sectors, 227.8
Alternative
medicine, 44.6
Architecture
and
engineering,
1,366.7
Medicine and
dentistry,
2,446.7

Broadcasting
and publishing,
171.1

Estate agency
and property,
124.3
Financial and
insurance
intermediation,
236.4

Marketing,
130.4
Legal services,
889.5

IT and business
consulting,
438.6

Healthcarerelated
services, 292.9

Source: Finaccord Professional Indemnity Insurance in Europe report, 2013


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GWP per insured enterprise in Europe

EUR

2013

Accountancy and finance
Alternative medicine
Architecture and engineering
Broadcasting and publishing
Estate agency and property
Financial and insurance intermediation
Healthcare-related services
IT and business consulting
Legal services
Marketing
Medicine and dentistry
Other professional sectors
Average


1,194.9
513.2
2,313.8
3,252.4
869.9
1,019.6
690.8
2,369.1
1,961.3
2,569.5
4,093.6
5,546.5
2,117.7


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GWP per insurable enterprise in Europe

EUR

2013

Accountancy and finance
Legal services
Marketing
Other professional sectors

929.4
218.6
1,482.4
723.8
450.5
518.0
486.7
395.4
1,768.8
413.8
3,883.1
425.9

Average

1,088.1

Finaccord Professional Indemnity Insurance in Europe 2013 report


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General risk trends in the medical sector
 Compulsory cover for professional indemnity risks is nearly universal for
private medical practices in Europe nowadays
 Arrangements for hospitals vary as cover may be provided by public
sector entities in some countries
 Three professional sub-segments have been hit by escalating claims in
most countries in recent years: gynaecologists, obstetricians and plastic
surgeons
 Medium risks are often represented by anaesthetists, most surgeons,
ophthalmologists and orthopaedists
 Lower risks are usually found among general practitioners and dentists



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Country-specific risk trends in the medical sector (Italy)
 Italy has faced the strongest escalation in claims in Europe in recent
decades
 For all years between 1994 and 2011, the overall claims ratio for
professional indemnity insurance in the medical sector amounted to 175%
(ANIA)
 57% of all premiums in 2011 were attributable to hospitals (ANIA)
 Slight negligence is often sufficient to establish the liability of medical
staff
 Plans for a public fund for those professionals unable to find insurance
have yet to be implemented



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Country-specific risk trends in the medical sector (Germany)
 German hospitals have seen significant increases in claims since the
1990s
 Hospitals account for about 66% of all claims made in Germany (GDV)
 About 25% of claims are made by statutory health insurers
 Several insurers have left the market due to high claims ratios
 Exit of Zurich in 2012 led to a crisis of insurability for some hospitals,
and sharp increases in premiums



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General risk trends regarding architects / engineers
 Compulsory cover for professional indemnity risks in most countries
although this is not always strictly enforced
 Great divergence in legislation and legal interpretation of liability risks
related to the construction sector in Europe
 Cyclical factors in the construction sector can lead to high volatility in
underwriting capacity, premium rates and claims ratios
 Engineers outside the construction sector are generally considered lowor medium-risk
 Professionals in the areas of landscape architecture, urban planning
and interior design are generally considered low-risk



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Country-specific risk trends regarding
architects / engineers (UK)
 Market has been affected by volatility in the UK real estate sector
 Premium rates fell for architects and engineers involved in construction
projects after 2009
 Surveyors involved in valuation work have seen sharp increases in
claims and premiums after 2009
 Surveyors not exposed to valuation work are low-risk and have
benefited from very competitive premium rates in recent years



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architects / engineers (Germany)
 In Germany, liability is based on the occurrence of a professional error
rather than claims-made principle
Dramatic increases in claims in the 1990s and early years of this century
 The German market has seen the withdrawal of several important
insurers
 In recent years, there have been small increases in claims linked to
professionals linked to the construction sector
 Premiums for practitioners with good claims records have remained
stable



13


General risk trends regarding the legal services sector
 Compulsory cover for professional indemnity risks is nearly universal for
legal professionals in Europe nowadays

 Legal practitioners involved in commercial disputes, mergers and
acquisitions, and insolvency procedures tend to have the highest claims
 In several countries, cover for lower-risk professionals can be obtained
through collective contracts organised by national or regional professional
bodies
In most countries, premium rates have been declining in recent years
although clients often use this as an opportunity to increase insured sums



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the legal services sector (UK)
 The UK market for insuring professional indemnity risks of the legal
services sector is far greater than any other in Europe
 Claims and premiums for solicitors have been very volatile in recent
years
 The exit of insurers has caused severe problems for smaller solicitor
firms
 Insurers have tended to view large solicitor firms as lower risk

 Barristers are considered as relatively low risk and all take out
compulsory primary cover through a mutual insurer



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the legal services sector (France)
 The French market for insuring professional indemnity risks in the legal
sector is relatively small compared to both the UK and Germany
 French lawyers do not take out insurance individually but are instead
automatically covered by collective policies of their local law societies
 Larger law firms take out additional cover

 Claims tend to be comparatively small in size and number



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Risks in non-traditional professions
 IT and business consulting, Marketing: growing demand for insurance,
professional errors are sometimes difficult to define, insurers are keen to
compete for clients in these sectors
 Alternative medicine: considered low-risk at the moment, relatively few
claims, inexpensive policies but a very small and fragmented market

 Broadcasting and publishing: growing interest in the liability risks of
online media such as blogs, but limited demand for insurance; new EU
Data Protection Directive may affect liability risks in the longer term



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Future outlook
Estimated CAGR in Europe for professional indemnity
insurance across different professional segments, 2013-17
Accountancy and f inance

1.9%


4.3%


1.9%


0.6%


1.7%


1.6%


2.6%


4.3%

Legal services

1.8%

Marketing

3.1%


3.3%

Other prof essional sectors

1.6%

0%

1%

2%

3%

4%

5%

Source: Finaccord Professional Indemnity Insurance in Europe report, 2013


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Presentation: Risks in Underwriting Professional Indemnity Insurance in Europe

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Presentation: Risks in Underwriting Professional Indemnity Insurance in Europe