BI’s Article search uses Boolean search capabilities. If you are not familiar with these principles, here are some quick tips.

To search specifically for more than one word, put the search term in quotation marks. For example, “workers compensation”. This will limit your search to that combination of words.

To search for a combination of terms, use quotations and the & symbol. For example, “hurricane” & “loss”.

Login Register Subscribe

Errors and omissions insurance market generally remains soft

Some insurance rates edging higher, but competition limits increases

Errors and omissions insurance market generally remains soft

Much depends on an individual policyholder's line of business and loss experience when it comes to pricing for professional management liability insurance, also known as errors and omissions coverage.

While the market generally remains relatively soft, there has been some hardening, and companies in problematic lines of business such as real estate are likely to see less competition among insurers and higher rates, observers say.

There is, however, plentiful capacity available in the excess layers.

While not a true hard market, E&O overall has become a more difficult market, said Christopher Goettelmann, Palm Beach, Fla.-based executive vice president at Professional Risk Solutions L.L.C.

“We've seen a bifurcated approach between new and renewal business,” said David Powell, New York-based senior managing director at Aon Risk Solutions' professional services group, a unit of Aon P.L.C. Insurers are “more competitive on new business than they would be on the renewal book that they currently write.”

They also are differentiating between high-hazard and low-hazard risks, while policyholders with poor loss histories “get a different approach” than those with good loss histories, Mr. Powell said.

Geoffrey Allen, New York-based executive vice president at FINEX North America and national cyber and E&O product leader at Willis North America Inc., said professional liability is distinct from other E&O lines.


Law firms' or accountants' risk appetites and loss experiences are “very likely to be largely, if not radically, different from the more general E&O market, so those same markets are going to be their own drummer, to a large extent” when insurers price professional liability coverage, he said.

The more general E&O market, he said, can be any service provider or technical product provider. It also can include management consultants, computer programmers and media companies, said Mr. Allen.

As this year started, general E&O underwriters thought they had to increase rates 5% to 10% “to make up for many years of a soft market” and a deteriorating loss experience. But significant competition has meant underwriters wanting higher rates have been somewhat held in check “by the broader market dynamic,” he said.

Excluding professionals with very serious claims or in a difficult class of business, “most of our clients are seeing their renewals coming in flat, with no increase to maybe a point or two up,” Mr. Allen said.

“We do even have insureds where competition has been very heated for their business amongst insurers, leading to rate reductions,” he said. “A well-run company with good loss experience, with good risk management, can see anywhere from a slight reduction to a flat renewal, with maybe a little bit of an increase depending on specifics,” he said,

Overall for miscellaneous, general E&O, there is “no problem. It's soft,” said Peter Taffae, managing director at wholesale brokerage Executive Perils Inc. in Los Angeles. “There are 20 markets” for this business.

“Where you're going to run into problems” is real estate, including property managers, mortgage brokers and real estate brokers. “Anything that is associated with real estate, buckle your seatbelt,” he said.


Rodger J. Laurite, Atlanta-based senior vice president of Lockton Cos. L.L.C.'s financial services practice, said rates have been flat to up a couple of percentage points on renewals for miscellaneous professionals, which includes consultants, trustees, staffing firms and third-party administrators.

For architects and engineers, rates are flat to up slightly; professional liability rates for lawyers are seeing at most moderate increases; rates for technology firms are soft; while rates for privacy and cyber coverage are very soft.

Focusing on accountants, lawyers, architects, engineers, cyber and commercial E&O, which includes miscellaneous media and technology coverages, Kenneth Rand, New York-based managing director of Marsh Inc.'s E&O practice, said rates ranged from flat to up 5% in the second quarter.

While an uptick in claims is the basis for driving larger increases on select accounts, “that's balanced with still an abundance of capacity,” which is keeping increases to a minimum, Mr. Rand said.

There is more competition in the excess layers than in the primary markets.

“We've certainly seen a bifurcated approach to primary or secondary layers vs. high excess layers,” which insurers are “more inclined to participate in,” while business in the lower layers is subject to “much more scrutiny,” Mr. Powell said.

“Higher excess layers are still very competitive, but the insurers are looking to increase rates on the primary level,” he said. “Capacity is being deployed more carefully for primary and lower excess layers,” while “it remains relatively abundant” in the higher layers, he said.

Lockton's Mr. Laurite said there is significant competition in the $5 million to $10 million layers. As a result, “you might see an increase (in the primary layer) and manage to squeeze out a 5% decrease (in the excess layer), so overall it's flat,” he said.

Read Next