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

E&O rates flatten as competition starts to ease


Signs of decreasing competition are beginning to appear in the errors and omissions liability market, observers say.

Gene Mason, senior vp and head of professional lines for Endurance Specialty Holdings Ltd.'s U.S. wholesale insurance operations, said, overall, “rates have flattened pretty much across the board. We've been able to retain prices on most of our renewals and been able to achieve price increases on a good many for the cases that we write, and that's pretty consistent with the market right now” that is writing true miscellaneous E&O business.

Mr. Mason added, however, “On occasions, we have to walk away” from writing the business. “We still see spotty evidence of carriers coming in at 20% to 25% on expiring accounts,” where premiums are in the $500,000-plus range. “We're still seeing some carriers coming in and aggressively taking the business away,” although “it doesn't happen a lot,” Mr. Mason said.

Mr. Mason said he also is seeing evidence of tightening terms and conditions. For instance, Endurance has been able to retain renewal business with lower self-insured retentions, he said.

Mike Smith, principal of Franklin Lakes, N.J.-based Axis Insurance Services L.L.C., which does a significant amount of business in the insurance agents and brokers area and for commercial real estate firms, said rates have flattened over the past six months or so. He said underwriters are upset that rates have “dropped as low as they can go, and so we started to see the pricing flatten” or even increases of at least 10% for a couple of the insurers.

“It seems we're starting to see some logic come back into the market, whereas in the last two, three years there's been no logic whatsoever,” said Mr. Smith. “Very few” clients are continuing to get reductions, he said.

Mr. Smith said he anticipates the trend toward higher rates to continue “because on the loss side, I'm seeing claims.”

Mickey Estey, managing director of the E&O practice at OakBridge Insurance Services L.L.C. in Beachwood, Ohio, said one trend he has seen over the last year or so is some rate hardening in the construction industry, particularly for accounts with claims, including those of contractors and engineering firms. “It could be as much as 10%, 20% or more, depending on the type of activity they have,” he said.

And Jim Donovan, New York-based senior vp in the professional liability unit at Liberty International Underwriters, said: “There's definitely some talk of rate increases in certain lines, and that's a first step towards rates increasing.” For lawyers' E&O coverage, for instance, rate decreases “are a thing of the past,” and the best they can hope for is a flat rate.

“Certainly as the economy improves, that gives impetus to seeing a rate increase,” while in a poor economy rate increases are “fighting the headwinds,” Mr. Donovan said.

Sandy Codding, Boston-based leader in the U.S. commercial E&O advisory practice of Marsh Inc.'s FINPRO unit, who focuses on miscellaneous and technology E&O, media liability and cyber coverages, said rates generally are still competitive, “but we did see a decline in the pace of rate reductions.”

“We were still able to get some reductions but they were of a lesser magnitude of a year ago,” Mr. Codding said. He said on average, there are rate reductions of about 3% across the portfolio.

Christopher Keegan, New York-based senior vp for national resource E&O and e-risks for Willis North America, said “it depends on the part of the E&O market we're talking about, but, just very generally, we're still seeing a soft market.” However, he said, “some of the larger carriers, especially carriers with a significant slice of the market” are “pushing back,” particularly for large risks that have had claims, and some have been willing to walk away from accounts.”

Florence Levy, Denver-based vp with Aon Risk Solutions' financial services group, said there have been slight decreases to flat renewals for “clean” accounts.

“It's hard to predict market conditions, but we've seen some activity on the claims side both in frequency of claims and severity of claims, particularly in the last six months. I could see that pushing the marketplace out of what's traditionally been called a soft market over the last few years.”

Catherine Mulligan, New York-based vp and national underwriting manager for specialty E&O at Zurich North America, said, however, that while “some folks are becoming a little more circumspect on certain classes of business, we're still seeing excess pricing that's been extremely aggressive,” even on first excess layers. She said she is routinely seeing premium rates of 50% to 55% of the primary pricing for excess layers, when “typically, ideally, you'd like to see at least 65% or 70% of the primary” pricing.

Peter Taffae, a D&O and E&O liability insurance expert at Los Angeles-based wholesale brokerage Executive Perils Inc., said insurers are “being very selective in what they write.” There are fewer carriers interested in writing the business, in particular for more difficult lines including legal malpractice, insurance agent's E&O and accountants malpractice, he said. E&O insurers are still willing to write the “more vanilla” lines of business, including miscellaneous and Web designers E&O, he said.

Endurance's Mr. Mason said, “There is evidence of contraction in the E&O market right now. When we look at our competitors, we see a number of companies that are either pulling out of certain classes, or maybe scaling back jurisdictions. For example, in California we see evidence of carriers no longer writing California real estate.”

However, Willis' Mr. Keegan said he has seen several new primary and excess entrants into the market over the past 12 months.

Read Next