Our analysis of the lawyers’ liability market is based upon the insurers we serve, and the data we receive. As a result, the underlying data is not identical to last year’s analysis. Large law firms are predominantly insured by carriers that write in multiple states and focus on firms with 25 or more attorneys. Our analysis therefore excludes data from mutuals, captives and risk retention groups.
Our analysis is based on on-level premium of approximately $4.9B from 2007 – 2019 and on aggregated internal submission data reviewed through October 1, 2020.
The charts first exclude, then include an annual loss cost trend assumption of 2.5%. 2019 is still relatively immature at this point, with estimates largely driven by IBNR.
|84.9%||Ultimate Loss Ratio|
Our analysis of the difference between primary and excess layers is based on on-level premium of $1.3B for primary and $0.8B for excess from 2007 – 2019, and on aggregated internal submission data reviewed through October 1, 2020.
Our analysis of severity, large loss claims and estimated industry reported losses is based on estimated ground-up losses valued at $5 million or more. These total $7.7B across all years.
Our analysis is based on rate changes reported in submissions reviewed through October 1, 2020.
Using 2007 as our base:
Progress has been made in the past twelve months: large law firms are paying more for their insurance capacity.
However, large law firms are also generating larger claims in $ and #. The slowdown of such large losses in 2020 is likely to be temporary (and covid-19 related).
As noted, 2015-2018 policy years already exhibit worrying frequency and severity trends.
Global interest rates close to, and in some cases below zero, has ramifications for underwriters: if the float delivers little or no yield, insurers must generate all their return from underwriting profits.
Once again, we must note the need for carriers to continue to address prices and self insured retentions to better reflect the risks being assumed.
For rate to have kept up with a modest loss cost trend (2.5% from 2007) the index would now have to be at 1.400, rather than 1.081. Had that happened, the numbers would be:
|65.0%||Ultimate Loss Ratio|