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Errors and omissions liability rates depend on profession

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Pricing in the errors and omissions liability market depends on the profession and the account.

Mortgage brokers, title agents and consultants are among professions finding less available capacity, but others are getting flat or even reduced rates, observers say.

There may be distinctions even within professions. Large law firms, for instance, are facing higher rates than their smaller counterparts.

Observers note also that network privacy and data security coverage, which may be written in conjunction with E&O policies, also can affect rates.

“There are 150-plus classes of business, so no two accounts are really the same,” said Florence Levy, Denver-based senior vp and practice leader of professional risk solutions for Aon P.L.C.'s financial services group. However, insurers “are definitely focusing more on rates,” particularly “for clients that are perceived to have a high exposure.”

Generally, however, for “clean” accounts, “we're able to maintain some of the premiums by considering different structures or alternative structures, like bringing (insureds') retentions up in order to keep that rate down,” she said. Rate hikes are “not across the board. There's still a lot of competition in the E&O space, especially within the excess markets.”

Mickey Estey, managing director of the E&O practice at OakBridge Insurance Services L.L.C. in Beachwood, Ohio, said major insurers are seeking increases in the 5% to 10% range, while rates for those with high claim or litigation activity may be seeing increases up to 25%.

Mark Bennage, director of risk management at Windstream Communications, a Little Rock, Ark.-based unit of Windstream Corp., said, “I'm hoping to have a flat or modest increase in (rates), but I don't have any indications of what it will be.”

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Fred O. Pachón, vp of risk management and insurance for Santa Barbara, Calif.-based Select Staffing Inc., said, E&O insurers “are not telegraphing any significant increases. I think we will end up with more of a flatline renewal. That's consistent with prior years.”

“I would say across our portfolio, we saw premium go up about 2% to 3%,” although “there continues to be a wide range of changes” with swings as wide as 40% reductions and 40% increases, said Sandy Codding, Boston-based leader in the U.S. commercial E&O advisory practice of Marsh Inc.'s FINPRO unit who focuses on technology, media, cyber and miscellaneous E&O business.

Professional classes of E&O business are seeing rate increases trending in the low to mid-teens, although “some of the better-performing classes are not quite that much,” said Paul Romano, Farmington, Conn.-based executive vp at OneBeacon Professional Insurance, a unit of OneBeacon Insurance Group Ltd.

Christopher Keegan, New York-based senior vp, national resources E&O and e-risk for Willis North America Inc., said some large law firms as seeing higher rates, but smaller firms' rates are likely to be flat. “Certainly, the financial troubles of some of the larger law firms that are in the press has heightened the potential for lawsuits,” he said.

“We're still seeing new markets coming into the space, which are competing on cyber risks and some of the higher excess risks, which are keeping that part of the marketplace...softer,” Mr. Keegan added.

Phil Norton, Chicago-based president of the professional liability division at Arthur J. Gallagher & Co., said certain business is more difficult to place.

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“I've experienced four deals that I've brought to the market the last few months where capacity has gotten restrictive, and either a carrier has left that little market segment” or insurers may be offering, for example, only $3 million in capacity, down from the $5 million they had offered previously, he said.

In addition, “We're seeing a lot of extra processing on the E&O with insurers asking for conference calls, where in the past we just got a quote,” he said. “So it's more work and much more client intervention” that is required, particularly in segments that have lost capacity.

Insurers also may be cautious in cases where E&O coverage is combined with privacy and network security coverage, Mr. Estey said.

“We hear from the underwriters that with all the high-profile data breaches over the last six to 12 months, that is definitely a factor in their rating,” said Mr. Codding.

Bill Beck, Kansas City, Mo.-based senior vp, insurance and claims counsel for Lockton Cos. L.L.C., said, however, “Notwithstanding the fact we see some hardening on the E&O front, underwriters are not pulling back, by and large, on terms and conditions.

“We're still able to obtain expansions to coverage where it makes sense to expand, and we see a fair amount of innovation coming from underwriters,” Mr. Beck said.

Meanwhile, Mr. Codding said that while half a dozen insurers may regularly be willing to quote on the primary large-account business, there are another 25 to 30 that are willing to quote the excess layers. “Certainly as you go up the tower, you would expect the lower likelihood of claims.”

Catherine Mulligan, New York-based senior vp-specialty E&O for Zurich North America, said, “I still see the excess market being very soft, particularly on first excess layers, which have been continuing to be priced quite aggressively.”

Catherine Mulligan, New York-based senior vp-specialty E&O for Zurich North America, said, “I still see the excess market being very soft, particularly on first excess layers, which have been continuing to be priced quite aggressively.”