A brighter outlook for this year’s PII renewal season

There are several very positive signs coming from the solicitors’ professional indemnity insurance (PII) marketplace that suggest a much more stable renewal environment this October for insurance buyers, compared to recent experiences.

Renewal process

Some established insurers have started the renewal process early and have expressed a desire to grow their respective portfolios.

As a result, they are offering straightforward renewal quotes and extended policy period options.

This demonstrates insurers’ commitment to the sector and an interest in maintaining their current client portfolios, potentially creating some competition which may benefit legal practices.

Alternative options

Insurance buyers are already facing alternative options in the marketplace for additional coverage above the mandated or compulsory coverage.

This first excess layer above the compulsory limit is also referred to as the working layer. It has not been very attractive for insurers in recent years but this has changed due to past price corrections.

There are also signs that some new and strongly rated insurers may enter this segment soon.

As a result, legal practices can generally (subject to claims history) expect more moderate rate increases than the double-digit quotes received in recent years when insurers were eager to address rising claims costs.

Other factors

In the upcoming renewal process, other factors will carry more weight such as:

• fee income levels
• the risk profile of a legal practice
• rising asset and transaction values
• inflation 

Changes with underwriters

Whilst many established insurers have an appetite to grow, their underwriters are likely to continue to adopt some caution in line with their corporate strategic parameters and risk appetite, reflecting the current economic and political environment.

Ultimately, underwriters need to ensure that the business remains profitable by taking decisions according to the results of a strict risk assessment.

Practice areas that are potentially more exposed to recessionary claims will again be under the spotlight.

For example, practices with high property exposures will have fewer options available to them and will therefore require a more elaborate strategic renewal approach.

Due to the current talent war, there has been a lot of movement in the solicitors’ PII underwriting community recently.

Many underwriters have been moving to competitors, new underwriting capacity providers, and different insurance segments.

Generally, this tends to produce a positive outcome for insurance through greater competition, but given the regulatory framework, internal governance requirements, contractual notice periods, and covenants, the legal profession is unlikely to benefit from this movement until 2023 at the earliest.

In the short term, this may create some capacity limitations for insurers.

Recommendations for practices

Given this, and that approximately 55% of practices will be renewing their insurance at the same time, I recommend:

• starting the renewal preparation process early
• producing a quality presentation that articulates how and why your practice is unique

This is essential to ensure the best possible outcome at renewal.

Due to the limited number of participating insurers active in the marketplace, scattering the renewal presentation is ill-advised.

Sole practitioners through to four-partner practices should:

• enquire which insurers their representative(s) can access directly on their behalf, and
• what appetite these insurers have for the specific risks that are to be transferred

There is no benefit in engaging with several intermediaries with the same insurer access, as insurer duplication could have a negative impact on the outcome.

Similarly, there is no benefit in presenting risks to insurers that fall outside of their appetite framework.

Furthermore, to streamline the process it is advisable to:

• remove unnecessary links in the chain, and
• ascertain whether your current broker can undertake an extensive direct marketing exercise on your behalf

If this isn’t the case, act quickly and either complement or replace the services with a reputable alternative.