The professional indemnity market has continued to evolve at a pace throughout 2025. After two years of gradual softening, expectations may have been for a stabilisation of rates, but new entrants and increased appetite for new business have driven competition and further rate reductions throughout the year.
Well-performing insureds, who demonstrate strong governance and risk management, can typically expect to achieve rate reductions in the region of 10-15% but there are often far greater savings available when approaching new insurers.
The challenging market conditions of 2018-2022 are now firmly in the rear-view mirror. The increase in rates throughout that period attracted new entrants seeking to capitalise on the opportunities presented by a distressed market. Many of those who had withdrawn entirely or stepped back during that period returned with pricing having reverted to what were considered more sustainable levels. Incumbent insurers have sought to maintain premium levels by writing new business and increasing line sizes on existing business. Furthermore, along with the downward trend in premiums, insureds are benefiting from a relaxing of underwriter attitudes towards coverage and deductible levels.
Much of the new capacity in the market has come in the form of Managing General Agents (MGAs) underwriting under delegated authority from insurers. Whilst they do have some involvement with profit commissions payable based on underwriting performance, it is their underlying capacity providers that bear the risk in terms of claims, allowing MGAs to focus on top-line premium growth.
MGAs generally participate within the SME space as they often do not have the underwriting authority to tailor policies to more complex organisations, including those with global exposures. Nevertheless, this has had a ripple effect through the conventional company and Lloyd's markets, forcing them to respond. Whilst new entrants operate unencumbered by the typical 6-7-year tail of a PI book, longer-term participants must temper their desire to compete with the need to maintain profitability over a long-term period.
When the market began to recover in 2022 and 2023, many of the greatest premium reductions were seen on excess layers. Many insureds would have seen these layers multiply in price during the hard market, but these layers are now returning towards minimum levels. As such, insurers are now turning their attention to primary layers where the rewards are greater from a premium perspective but clearly pose a greater exposure to claims.
Another significant factor in the softening of the market has been the movement of personnel. Senior underwriting figures have arrived at new insurers armed with ambitious targets and growth plans. As a result, brokers have a greater number of insurers to approach, as long-standing underwriter relationships move to new insurers, creating new opportunities. Ultimately, brokers now have several more options to present to clients, with varying premiums for coverage benefits.
Buying Trends
As a result, clients often face difficult decisions over whether they remain with incumbent insurers at potentially higher premiums, many of whom may have supported them through the hard market. Whilst continuity of insurer is generally encouraged, it is difficult for many firms to ignore potentially significant premium savings even if that comes with a potential compromise in coverage, service or claims handling proposition.
In general terms, larger firms tend to exercise more caution and might not face the same financial pressures as a smaller business to prioritise cost over continuity. Similarly, larger firms are more likely to have closer relationships with their insurers and feel a sense of loyalty due to past claims payments, whereas smaller firms may treat their insurance more as a commodity with cost as the overwhelming factor.
Claims Trends
The increased use of Artificial Intelligence (AI) poses threats to all professional service firms when used indiscriminately without suitable human oversight. As such, insurers are taking a greater interest not just in the use of such technologies but also in the culture of a firm, which may place pressures on staff to increase output and cut costs, both of which can be achieved through the use of AI and potentially at the cost of risk management.
In the construction environment, the increased complexity of projects and employment of new techniques and technologies can lead to claims arising from design flaws and inadequate specifications, particularly where they pertain to meeting certain sustainability and environmental standards.
Fire safety and cladding claims continue to be notified from historic projects and remediation work as professionals adapt to new legislation, some of which has been applied retrospectively in certain jurisdictions.
In the legal sector, we are seeing an increasing amount of high-profile losses arising from niche litigation practices.
However, the most common root causes of PI claims are largely unchanged:
- Unclear scopes, including failure to document and charge additional fees for variations
- Lack of clarity over roles and responsibilities
- Contractual obligations such as enhanced duty of care and fit for purpose provisions
- In the construction space, underpriced design and build bids where contractors seek to make up profit margins through claims against consultants
- Selecting projects and contracts that fall outside of a firm’s expertise
- Vetting of sub consultants, including checks on their PI Insurance and financial health. Larger professional service firms often find themselves as the “last man standing” where other firms become insolvent or carry insufficient insurance.
On a wider note, almost all of our professional service firms report the challenges in attracting and retaining talent. High turnover makes it difficult for firms to embed risk management procedures into the culture of a firm, and over-stretched workforces increase the chance of errors and omissions. Finally, macro-economic uncertainty has historically led to an increase in litigation and inflation impacts claims themselves and the associated costs.
Outlook
Whilst the current environment is overwhelmingly favourable for clients, the market faces somewhat of an inflexion point. Initial indications suggest profitable years of account in 2023 and 2024, but there is still a long way to go until these years reach their ultimate claims position. Furthermore, emerging risks to the PI market continue to evolve in an increasingly unstable and volatile world. As such, insurers must decide whether they continue on the current trajectory or seek to arrest what appears to be an inevitable slide towards the market conditions experienced in 2018. The cyclical nature of the insurance market means that a return to harder conditions is inevitable, but the next 24 months will dictate how quickly we reach that position.
Gallagher Professional Risks
At Gallagher, we design Professional Indemnity solutions for all professional services firms regardless of sector, size or territory. As one of the largest brokers in the world, we have access to a wide range of insurers, which allows us to capitalise on current market conditions and leverage our relationships to place a competitively priced programme with bespoke coverage tailored to the unique exposures faced by each of our clients.
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