Surveyors PII Market Update – June 2022
08 June 2022
October 2022 will mark 4 years since Lloyds of London carried out its annual performance review, which highlighted the need for swift remediation in the Professional Indemnity Insurance (PII) Market outside of the USA in order to reach sustainable profit levels.
Since the Lloyds review, the Market has often been described as the ‘perfect storm’ combining Lloyds profitability challenges, with a general tightening of underwriting for the more volatile exposures and activities such as fire safety and cyber, as well as capacity shortfalls and all before the Covid-19 pandemic and its perceived impact on the UK property market, which brought heightened fears to insurers of a new onslaught of claims against valuers for alleged over-valuations.
Howden has worked hard over the years to understand how the surveying industry has improved its approach to risk management, including looking at the front line processes of the industry, the evolving role of the panel manager, new regulations, bank lending practices and not least, changes brought to the claims litigation funding landscape. Much more can be said about how the claims environment could be different in the event of any fall in property prices, but until such time when this can be proven, insurers have been and will continue to look closely at the profession.
Improving market emerging
With the significant increase in the cost of PII over the last 36 months in particular, firms will find some comfort to learn that signs of an improving market are emerging. In the face of a prominent insurer recently exiting the surveyors PII market, our experience from early 2022 has shown insurers now willing to provide more capacity and look more favourably at areas which they may not have written at all during the last couple of years.
As from 1st April 2022, two new insurers were added to the RICS listed insurers panel and as well as this, we also saw the return of insurer; Allied World Assurance Company. A welcome change, to an otherwise limited pool of insurers.
It was also great to see two separate consultations lead by RICS at the beginning of the year, with the aim to review its model surrounding PII and the minimum terms it requires its members to have in place. As the Chair of the forum leading the PII consultation said, there is no single easy quick fix to the problems covered in the consultations, but the series of short-term proposals provided should provide additional support to regulated firms and the medium term actions will examine whether more fundamental structural changes to the PI model are required. So with that, we look forward to seeing how this progresses and from Howdens part, will be pleased to assist in this process in any way we can.
Whilst there is a long way to go, the sentiment of this short article, should be slightly more encouraging than other articles which have been read over the last two years. There are green shoots in the market with progressively flattening premium rates hikes, early signs of an increasing in capacity and new insurers entering the Market.
The Market renews its capacity on the 1st January each year and whilst conditions seem to be improving, we expect insurers default positions to still require some rate increases for the duration of 2022.
However we expect more pressure to be put on insurers to respond to the additional competition available and in light of the broader improvements in the Market.
How much you, as PII purchasers, can benefit from these changes will naturally depend on a number of factors, largely depending on your risk profile, including the activities your firm undertakes, claims experience and the sectors in which you operate. But this can undoubtedly be helped by your own approach to renewal and the extent on which your broker is able to respond to the shifts in the market and having a clearly defined strategy.
Greg Harrison - Larger practices
Greg is an expert in Professional Indemnity for property and construction professionals. He works with clients from across the sector, including engineers, surveyors, and architects. If you have any questions about PI – or any other insurance that affects the property and construction industry – just drop him a line.
The opinions and views stated in this article are those of Howden Insurance Brokers Limited (“Howden”). Howden shall not (i) owe or accept any duty, responsibility or liability to you or any other person; and (ii) be liable in respect of any loss, damage or expense caused by your or any other party’s reliance on this article.