Optimism for London PI market in the coming months – Clyde & Co

There is “widespread optimism” for the London professional indemnity (PI) market, though many remain wary of looming macroeconomic and inflationary pressures, a new report from global law firm Clyde & Co found.

The firm’s second annual London Market Professional Indemnity Report surveyed 89 targeted London market insurance practitioners to uncover what would help the industry overcome its pressing and future challenges. It found that 88% of respondents said they believe rates will continue to increase in the next 12 months. However, 61% also indicated that “broad economic trends” would affect the volume of PI business underwritten in the London market.

Clyde & Co’s survey was conducted in May – around the time the UK Prime Minister announced his resignation and inflation increased further. But the firm noted that even before these two things happened, “respondents were already mindful of the effect the macroeconomic and geopolitical climate will have on the PI marketplace.”

Most of the respondents are expecting the PI claims landscape to worsen significantly over the next two years. A good 80% of respondents said they expect the frequency of claims to increase in the next 24 months, while 68% expect the severity of claims to increase within the same period.

In addition, 57% of respondents said that economic uncertainty, which includes wage and cost inflation, would also affect the volume of claims.

Some other key findings of the report include:

• 81% of respondents expect more new entrants, exits and consolidation in the marketplace in the coming months.
• 88% of respondents say rates will increase in the next 12 months.
• 53% of insurers say their appetite for writing PI coverage will increase.
• 64% say post-COVID working practices will create challenges in building and maintaining networks.

“These findings show a great degree of optimism in the London PI market despite increasing economic headwinds,” commented Clyde & Co partner Simon Konsta. “While respondents overwhelmingly believe the frequency of claims will increase over the next two years, there’s confidence that the market has sufficient capacity and is at a satisfactory level in terms of rates to weather any coming storms and remain both a competitive and respected hub for PI risks.”

Konsta also pointed out that 86% of respondents said that buyers would be able to maintain existing aggregate limits at their upcoming renewal.

“Respondents, as well as buyers of PI coverage, will have an eye on inflation levels as we move past the most recent renewals,” the partner said.