Presentation: Risks in Underwriting Professional Indemnity Insurance in Europe

Risks in underwriting professional indemnity insurance: a European overview

© Finaccord Ltd., 2014 Web: www.finaccord.com. E-mail: [email protected] 1

Bancassurance Models

Around the World

Risks in underwriting professional

indemnity insurance: a European overview

3rd Annual Insurance Risk Management Forum

Vienna, 20th February 2014

http://www.finaccord.com/

mailto:[email protected]



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





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





The European market for professional indemnity

insurance by international comparison

Estimated market sizes in terms of GWP (2013)

20.0

9.2

1.2 1.10.1

0

4

8

12

16

20

USA Europe Canada Australia South Africa

USD billion

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

Finaccord estimates





Comparing different professional segments in Europe (1)

Segmentation by professional sector of the European market in terms of GWP (EUR million, 2013)

Source: Finaccord Professional Indemnity Insurance in Europe report, 2013

Accountancy and f inance,

412.0 Alternative medicine, 44.6

Architecture and

engineering,

1,366.7

Broadcasting and publishing,

171.1

Estate agency and property,

124.3

Financial and insurance

intermediation,

236.4

Healthcare-related

services, 292.9

IT and business consulting,

438.6

Legal services, 889.5

Marketing, 130.4

Medicine and dentistry, 2,446.7

Other professional

sectors, 227.8






GWP per insured enterprise in Europe

EUR 2013

Accountancy and finance 1,194.9

Alternative medicine 513.2

Architecture and engineering 2,313.8

Broadcasting and publishing 3,252.4

Estate agency and property 869.9

Financial and insurance intermediation 1,019.6

Healthcare-related services 690.8

IT and business consulting 2,369.1

Legal services 1,961.3

Marketing 2,569.5

Medicine and dentistry 4,093.6

Other professional sectors 5,546.5

Average 2,117.7




© Finaccord Ltd., 2014 Web: www.finaccord.com. E-mail: [email protected]


GWP per insurable enterprise in Europe

Finaccord Professional Indemnity Insurance in Europe 2013 report

EUR 2013

Accountancy and finance 929.4

Alternative medicine 218.6

Architecture and engineering 1,482.4

Broadcasting and publishing 723.8

Estate agency and property 450.5

Financial and insurance intermediation 518.0

Healthcare-related services 486.7

IT and business consulting 395.4

Legal services 1,768.8

Marketing 413.8

Medicine and dentistry 3,883.1

Other professional sectors 425.9

Average 1,088.1

7





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





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





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





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 low-

or medium-risk

Professionals in the areas of landscape architecture, urban planning

and interior design are generally considered low-risk





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






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





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






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






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





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





Future outlook

Estimated CAGR in Europe for professional indemnity

insurance across different professional segments, 2013-17

1.6%

3.3%

3.1%

1.8%

4.3%

2.6%

1.6%

1.7%

0.6%

1.9%

4.3%

1.9%

0% 1% 2% 3% 4% 5%

Other professional sectors

Medicine and dentistry

Marketing

Legal services

IT and business consulting

Healthcare-related services

Financial and insurance intermediation

Estate agency and property

Broadcasting and publishing

Architecture and engineering

Alternative medicine

Accountancy and f inance

Source: Finaccord Professional Indemnity Insurance in Europe report, 2013



Presentation: Risks in Underwriting Professional Indemnity Insurance in Europe

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