Marketplace Realities 2018: Professional liability (E&O)

November 6, 2017

    The one thing

    Companies must be prepared to discuss their vendor contracts, with a focus on how vendors limit their liability and options for dispute resolution.
  • Loss ratios for middle market clients continue to attract new and traditional carriers seeking to expand their market share in this space. However, we still see modest premium increases, partially due to the broadening of policy language. Small rate increases should be expected by buyers of all sizes.
  • Cyber is increasingly a main driver in this space, and the marketplace continues to contemplate the effect of large data/privacy losses from the retail and large technology service sectors. The premium and retention impact is limited, however, as some markets had already stopped writing primary professional liability coverage for large technology companies. Some carriers also tend to be more aggressive on combined cyber/E&O programs even in these sectors.
  • Miscellaneous professional (MPL) service definitions continue to be heavily scrutinized by underwriters as companies continue to expand offerings and services, potentially yielding overlap with manufacturers or product liability policies and E&O coverage.
  • Companies of all sizes with new media and service offerings can expect to see additional underwriting due diligence in response to expanding global privacy laws, most notably the General Data Protection Regulation (GDPR) in the E.U.
  • Service providers are routinely being asked to buy higher limits and cyber is largely driving the demand. Narrow indemnification language in vendor agreements is another driver.
  • Price prediction

    Good loss experience
    Flat to +5%
  • Risks grow as companies offer more services online, including manufacturing companies providing their products as a service via a technology platform.
  • Professional firms are increasingly looking into cyber coverage due to recent incidents involving the wrongful disclosure of confidential client information.
  • More buyers are seeking to expand coverage to include REITS and joint ventures where majority ownership or majority voting rights are not with the named insured.
  • Companies with no losses and manuscript wording should be able to improve their coverage.
  • Retentions are being reviewed case by case, driven by the overall size of an organization and the professional services being provided.
  • Authorized global E&O limits are approximately $800–900 million. Typical insureds should be able to buy $500–600 million.