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Member, Beacon International Group, Ltd.
The medical malpractice insurance market is expected to soften in 2010, though some medical malpractice insurers could still be profitable this year, according to a report released Friday by Standard & Poor’s Corp.
According to New York-based S&P, pricing for medical malpractice insurance is expected to decline at a more moderate pace than it did in 2008 and through the first nine months of 2009.
Rates fell 4% and 10% in 2008 and 2009 respectively, according to S&P, with declines varying by state. S&P said it expects rates to moderately decline in 2010 and expects that softened rates will reduce current accident-year underwriting profits in 2009.
“As a result of these prices, we see increasing price competition that will likely affect both new business and renewals,” S&P analysts wrote in their report, “In 2010, Medical Malpractice Insurers are Seeking Profits in a Soft Market.”
Ratings analysts with S&P expect more diversified insurers can sustain profitability despite the volatile marketplace and can “ultimately report a stable or improved combined ratio for 2009,” a trend they predict will continue through 2010.
According to S&P, underwriting profitability for medical malpractice underwriters increased in 2009 due to “continued favorable reserve development related to prior accident years,” which S&P said was greater than they had expected. Further, S&P said that as the market cycle softens and prices fall, the majority of medical malpractice writers are able to improve overall operating performance through favorable loss reserve development.
State damage caps as well as a reduced severity in claims have helped mitigate losses, S&P said. They added that a mix of operating expenses and investment income will “clearly influence the prospects of malpractice insurers in the near term,” but that in the soft market focus on pricing, loss trends and reserve releases also will play a role in profitability.