For the whole of my professional career and frankly for my whole life, October has been an important month for me for two key reason; firstly and most importantly I was born in October and secondly a significant proportion of Solicitors in England and Wales purchase their Professional Indemnity Insurance in October – something I have luckily been able to earn and living from for the best part of the last two decades.

Every year at around this time I am asked to look deeply into my crystal ball by Insureds, Brokers and Insurers all seeking views on the ‘State of the Market”. Are rates rising or falling?… Who is coming in to the market and who is pulling out?..What is the new killer underwriting question which will change the fortunes of insurers and insureds?

For many this is about market gossip and a game of follow the leader… we do our best to ignore the noise believing a solid approach to underwriting is the best course. Inperio’s relative performance as an MGA comes from judging the market dynamic both in the wider macro environment and the commercial actions of our competitions – and ultimately not being afraid of making a decision.

So with my crystal ball in hand (and a copy of the FT under my arm) I thought it was worth sharing with you where we see the direction of travel for Solicitors Professional Indemnity as we start the run up the 01 October 2020.

The first thing to note is that COVID-19 in our opinion will have little or no direct impact on underwriting Solicitors PI Insurance, yes some short term losses may arise from the new working from home cultural, that for many wasn’t well tested but most those losses are already accounted for in current earned premiums. That said COVID-19 meant that broadly everyone was in the same boat, and many hard deadlines have soften to deal with the new ways of working. This has meant that the transactional urgency which often causes claims has all but evaporated in the current lock down culture.

What however is real, and worrying is the actual underlying economic output data. The chance of a recession is inevitable. This means law firms will fail, those which are poorly capitalised, those which are highly geared, and those who don’t have one eye permanently on their P&L will be the likely candidates. Those ‘failing firms’ pose by far the highest risk to insurers regardless of the type of work they do, or their historic losses.

So will rates rise or fall. I think the first answer to that is currently premiums are in an operating range which should deliver positive returns for insurers, but probably don’t fully consider the propensity for increased claims which have historically occurred in recessionary periods. It is without doubt however that the market is “talking itself up’ numbers of 10%-15% are banded about like they are a certainty. But with every armchair pundit comes the economic reality of supply and demand. A reduction in insurers in the market driven by historic returns or shareholder and management sentiment is the real driver of premium rates and that only comes out as the market develops.

For our part we are happy where we are, we have about the right share of the market our projected returns are within our anticipated range… and so sadly we bring little extra gossip to market this year. So for Inperio it is more of the same, the underwriting discipline which I know  frustrates brokers and insureds alike but for which I am unapologetic will remain.

I am sure many Crystal balls will be read and reread over the coming months… but for our clients and our prospective clients we hope to continue to support you over the coming year providing long term certainty in respect of your Professional Indemnity policy.

The real unanswered question I have right now – is there a chance of spending my Birthday somewhere overseas which is warm and sunny or has pandemic condemned me to my desk for the whole of 2020?

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