Surveyors PII Market Update – March 2023
09 March 2023
As many purchasers of PII will know, the insurance market has been rather bleak, not just for the surveying and valuation profession, but for all professional services firms.
It is perhaps too easy to highlight the Lloyd’s Decile 10 review undertaken in 2018 as the starting point of the ‘hard-market’ cycle. However, the insurance market for the surveying profession was already under close examination - partly because of the uncertainty brought by the 2016 Brexit referendum and the speculated impact this would have on the UK economy. Then there is the fallout from the tragic Grenfell fire, which almost immediately affected surveying practices with construction related exposures, or those with property management responsibilities.
For the ensuing 12 to 18 months, we saw an increasingly tough marketplace, which many regarded as part of a long overdue market correction - but we do not think anyone predicted the severity of the capacity restraints and the consequences of that. Fast forward to March 2020 when conditions in the PI market became more difficult with a belt tightening in underwriting appetite and insurer’s reluctance to take on any new business.
2021 was almost as challenging, but with cautious optimism growing in the Market, as the UK entered and continued its recovery from the pandemic. Furthermore, changes to the RICS minimum PI requirements helped stabilise the market by easing certain elements of cover that insurers have historically always been required to provide Member Firms. The resultant impact of these changes is uncertain, but it is fair to say that without them, we could well have seen more insurers withdraw from the market. This was because several insurers felt that the breadth of cover under the RICS minimum PI terms at the time, was too wide in light of new and evolving risks. The two key changes were, Indemnity Limits being permitted on an ‘Aggregate plus Unlimited Reinstatements’ basis as opposed to ‘Any One Claim’, and policy excesses being made applicable to the defence costs of claims.
During 2021, the announcement of Aviva’s exit from the PII market late in December, led to uncertainty as to which insurers could replace their participation, at a time when generally they were not taking on any new business.
Coming into 2022, we saw more capacity coming into the marketplace with several insurers having looked at the Aviva exit as an opportunity to underwrite good, well-managed Insureds. In fact, conditions overall felt much calmer with many insurers confirming completion of their remediation plans and as a result were looking for gradual but cautious growth.
Whilst we are only at the beginning of the current underwriting year, early indications are that the market should see further improvements akin to that of 2022, with more renewals resulting in flat or reduced premium rates and rate increases becoming fewer and far between.
In a recent article, it was said that Lloyd’s will operate with a total market stamp capacity of at least 20.9% above what they had in 2022 [stamp capacity being the amount of premium the market regulator will allow an insurer to underwrite in any given year]. This additional insurer capacity deployed into the market has resulted in more insurers opening their doors to underwriting new business, leading to smaller increases in premium rates and for some firms no rate increase or limited premium rate reductions.
In conclusion, unless the claims landscape alters for the worse and insurers begin to see an uptick in claims activity, then we should continue to see improvements in the pricing and terms that insurers offer. Having said that, whilst insurers are increasingly open to writing new business, it will not be at any cost and will be with much caution. Therefore, firms should continue to approach their renewal in good time, paying due care and attention to the presentation of their risk management processes and procedures that make them a good risk for insurers.
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.