Healthcare Liability
(Re)Insurers more cautious with certain risks
The London Market appetite can be broad for healthcare liability risks if the dynamics of the risk transfer deal are right, particularly when attachment points are excess of attritional losses. Nevertheless, markets currently have a cautious outlook and risk selection is becoming more paramount, particularly when it comes to exposures to sexual abuse and molestation, automobile coverage for ambulances, systemic/batch related events, punitive damages exposure in the for-profit segments, and risks in venues such as Illinois, Pennsylvania and Georgia.
Changes in policy terms and conditions
Insurers are looking to exclude sexual abuse and molestation coverage from the systemic/batch related events coverage, and if they can’t achieve this, they will look for a co-participation from the insured on losses of this nature. In some cases, insurers are trying to exclude punitive damages – particularly in the ‘for-profit’ arena.
Underwriting changes
Underwriters’ appetite is expanding: Coverys is now setup in London to write business independently from its US operation; MS Amlin is looking to expand appetite on larger premium accounts;
Beazley and Mosaic are now exploring stand-alone Sexual Abuse and Molestation coverages which can be dovetailed to exclusions in the tower or sit separately. Despite Liberty, Arcadian, Chubb, and Beazley having non-UK access points, we have seen healthy competitive tension with these markets when they are considered as part of a diversified programme achieved through syndication.
Notable claims
The market has faced several high-profile stand-alone sexual abuse/molestation verdicts, with recent claims verdicts coming as high as USD 475m in one case and USD 200m in another. Some of these have an element of punitive damage nature. In addition, a recent birthing injury claim came in at around USD 100m.
Geographic/sector differences
Insurers view the US on a national basis given the widespread bodily injury cases in a variety of states. However, risks located in Pennsylvania, Georgia, Illinois and Florida can expect increased attachment points. Insurers are closely watching the Grieving Families Act legislation that is being prepared in New York which is expected to dramatically change the risk exposure in the state.
Outlook
Expected range in rate changes for the next 6 months for claims-free portfolios
Social inflation, bodily injury inflation and claims inflation are all factors driving the underwriting approach to rates. Sexual abuse and molestation coverage is being singled out and charged for separately, potentially with additional terms and conditions.
Expected capacity change in the next 6 months for claims-free portfolios
Traditional markets are taking a cautious approach to underwriting and are managing capacity deployment with line size control. New markets are negating the contraction in the traditional area, and we are keeping an eye on the developing marketplace in Cayman Islands. The Bermuda re/insurance market remains challenging, and some US markets are looking to deploy capacity on London Market placements.
Expected coverage change in the next 6 months for claims-free portfolios
Markets are looking to restrict exposure to punitive damages and sexual abuse and molestation by increasing attachment points.
The London Market appetite can be broad for healthcare liability risks if the dynamics of the risk transfer deal are right, particularly when attachment points are excess of attritional losses.
Emerging risks
Insurers are interested in understanding how clients are embedding Artificial Intelligence (AI) in their risk profiles and the measures they are taking to manage these risks. In general, claims defence strategies are evolving to match changes in the plaintiff environment. Insurance buyers need to be aware of the potential implications of systemic events for their operations. Underwriters are scrutinising the operating cashflow of hospitals, staffing challenges and shift distribution as well as hospitals’ short- and longer-term strategies.
Renewal recommendations
Insurance buyers need to be clear about their risk tolerance levels both today and in the future. One question that needs answering is how the enterprise risk transfer strategy aligns with the enterprise risk management of the organisation. To get the best outcome at renewal, it is essential to approach the most promising markets in the right geographies and at the appropriate underwriting level. Creating bespoke market presentations helps achieving better outcomes. Presentations should address key areas, including:
- Claims
- Strategies to respond to the evolving litigation trends
- A clear view of business financials, decisions, and outlook
A good understanding of the business’ protection needs makes the selection of options easier and enables a more efficient and effective market approach.
For further information, please visit the Lockton Specialty page, or contact:
William Barber
Partner, Head of US & International Healthcare
E. william.barber@lockton.com