Medical E&S writers warier of opioid, sexual misconduct exposures

AmWINS reports that conditions vary widely across a diverse E&S professional liability insurance sector, with the medical professional sector one area that is noticeably hardening.

In its Q3 state of the market report, the wholesale broker noted “material firming” in medical professional classes such as corrective healthcare, senior care and drug and alcohol facilities.

“The 2019 long-term care pricing increase projections of 5 percent to 35 percent appear to be conservative estimates in challenging venues,” said Kevin Ryan, senior vice president of healthcare at AmWINS Brokerage of Pennsylvania, in the report.

Long term care markets are pushing up prices or withdrawing altogether, with no one undercutting the market. Carriers are taking a more conservative stance on drug and alcohol rehab facilities.

The report noted that coverage enhancements granted to buyers during the soft market are being slowly removed. Carriers are now adding exclusions in response to the opioid crisis. They are also looking more closely at underwriting sexual misconduct exposure, with carriers that previously offered up to $15mn in the umbrella cutting limits to $5mn or lower.

AmWINS described a tough market in which to renew business.

“The markets are taking rate increases and increasing deductibles in classes such as long-term care, correctional (Beazley has changed their minimum deductible from $50,000 to $150,000), and hospitals,” said Philip Chester, senior vice president at AmWINS Brokerage of New England.

AmWINS stressed this difficult market will harden further in some areas. Venues that historically have been benign are now seeing claims severity, causing underwriters to re-evaluate their territorial appetite based on recent large verdicts.

E&S market hungry for private D&O

The report also covered other professional liability E&S lines.

The E&S market has seen a lot of movement in private D&O. Standard lines insurers that have “been beaten up writing larger companies” have pulled out of the market or increased discipline, according to David Lewison, national professional lines practice leader at AmWINS Group.

“As a result, we are seeing and writing more opportunities because we have wholesale markets that want to write them,” said Lewison.

In contrast, the E&S public D&O market is more difficult. The most challenging area is IPOs, especially for tech or biotech companies.

“Brokers are getting a lot of rejections and having to go to different companies and new markets to place coverage. We are seeing programs made up of many more layers offered by lesser-known insurance companies,” said Lewison.

The representations and warranties E&S market is competitive, with more capacity entering. More than 20 companies are now competing for business, up from fewer than eight a few years ago, AmWINS reported.

R&W rates have fallen in the past two years, with pricing quoted at 2 percent to 3 percent of the deal or even less for larger acquisitions. For merger deals of $50M to $500M, the retention is generally around 1 percent, said AmWINS, while for over $500mn it can be found for 0.75 percent.

Fewer than half of M&A deals use R&W insurance, which AmWINS believes provides good opportunity for market growth.

“We are also seeing more interest in smaller deals from the market,” said Kevin Dorse, executive vice president at AmWINS Brokerage of Georgia. “Deals pricing from around $125,000 and up will be considered, which may provide an opportunity for retail agents that may not have handled R&W insurance in the past.”

The competitive R&W market is giving greater opportunities to get clean quotes without risk exclusions for product liability and cyber liability, the report said.

E&S cover for lawyers and title agents is challenging for small law firms of one to five partners. Capacity is plentiful for law firms between 15 to partners. Cover for larger law firms is more difficult because this area has been hit by significant losses.

Title agents are enjoying favourable market conditions, with a return to 2006-era premiums following a prolonged hard market after the real estate bubble burst.

Signs of hardening rates for FI

Professional lines E&S cover for the financial sector has been soft for several years but signs of change are emerging.

“Some underwriters have seemed more reluctant to offer two-year terms or guaranteed renewals in the FI space – for banks, in particular – but they are still available,” reported Megan North, assistant vice president for professional lines at AmWINS Brokerage of Washington.

“We are also seeing increased retentions and restriction of large-capacity plays. Underwriters seem to generally be employing a more cautious and careful approach in this space than we have seen in recent years.”

Cyber is big concern for E&S insurers covering the financial sector. The rise of digital currency is also affecting financial risks. Asset management firms that elect to add a cryptocurrency fund may have difficulty getting E&O from their traditional insurance partners, AmWINS warned.

“Many insurers are cautious when it comes to exposures relating to crypto or alternative currencies and are beholden to underwriting guidelines or reinsurance treaties that restrict their ability to participate in that space,” said North.