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Survey Report

Insurance Marketplace Realities 2021 Spring Update – Healthcare professional and general liability

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By Kirsten Beasley and Bruce Whitmore | April 21, 2021

2021 premium growth goals by carriers are typically a precursor to an increase in competition.
Rate predictions
  Trend Range
Primary: Neutral increase +5% to +15%
Excess: Neutral increase +15%
By segment:
Hospital: Increase +5% to +25%
Allied health: Neutral increase +5% to +15%
Physicians (particularly venue dependent): Neutral increase +5% to +15%
Loss-affected accounts and tough venues: highly variable rate increases

Key takeaway

Most carriers have premium growth goals for 2021, which is a typical precursor to increased competition for business; however, these growth goals are counterbalanced by a continued pull-back on terms and conditions and a push for increased rate. Carriers are focused on the limits-to-premium ratio and their capacity deployments are consequently limited; this is substantively impacting the amount of capacity available.

Hard market: rate and coverage

  • While most healthcare insurers are seeking to grow prudently and judiciously in multiple healthcare segments, they show overwhelming interest in the allied health segment. However, carriers are still being selective, which means that clients need to differentiate themselves through superior claim outcomes and COVID-19 responses.
  • Rates will continue to rise in all segments of healthcare as markets maintain their focus on key variables: loss history, venue, historical rate decreases, exposure growth (especially physician onboarding over the last 10 years).
  • The focus on restricting terms and conditions will continue with sexual abuse, COVID-19, opioids and silent cyber at the top of the list. Most carriers are attaching cyber exclusions to medical malpractice policies. We urge buyers to ensure that policy language provides a carve-back for bodily injury arising from cyber events.

Hard market: the capacity

  • Substantial withdrawal of capacity has impacted North American healthcare risks, with less than $500 million now available in Bermuda, London and the U.S. (~$185-200 million in the U.S., $190 million in Bermuda and a bit over $100 million in London). Most of this decrease in available capacity is due to markets reducing their deployed capacity on individual risks from $25 million to $10 million or less.
  • Substantial withdrawal of capacity has impacted North American healthcare risks, with less than $500 million now available in Bermuda, London and the U.S. (~$185-200 million in the U.S., $190 million in Bermuda and a bit over $100 million in London). Most of this decrease in available capacity is due to markets reducing their deployed capacity on individual risks from $25 million to $10 million or less.
  • New entrants have joined the major markets (Bermuda, London and the U.S.), but the new capacity is considerably short of offsetting the gaps created by market exits and the reduction in deployed limits. Thus, large and complex risks are utilizing their captives and self-insurance vehicles to assume greater risk in their programs. This increased risk retention is often through mid-tower SIRs or captive assumptions to complete their insurance towers.
  • Self-insured retentions and deductibles at the bottom of programs are still increasing, both on a per-claim/occurrence basis and in the aggregate (where applicable).

Pandemic year two

  • COVID-related exclusions are not mandated on all accounts, with a few notable exceptions: all senior care risks, those clients that have submitted broad COVID-19 batch notices and those with high profile COVID-related incidents. Hospital or integrated delivery systems with robust senior care or home health operations are starting to see COVID exclusions applied to those exposures.
  • Most markets have received thousands of COVID-19 incident notices, predominantly from the senior care segment, but also from hospitals and allied health risks. Very few markets have more than a handful of asserted claims, so carriers will be closely monitoring these notices to determine whether COVID-19 claims will be portfolio events or isolated incidents.
  • Multiple markets in London, Bermuda and the U.S. are clarifying their batch language specific to COVID-19, inserting language that states that COVID-19 alone does not create the causal/related link necessary to batch claims together.
  • Markets are focused on getting updated information from clients about their pandemic response, vaccination distribution, insights on state-by-state immunity, COVID-19 incidents and claims management.

Hard market and captive usage

  • As rates and retentions rise and carriers continue to introduce limiting language, more healthcare entities have expanded the use of their captives.
  • This may be partially driven by an organization’s preference to pay premium into their captives and collect corresponding underwriting profits (as commercial carrier pricing is set to exceed expected losses).
  • Another driver is the ability to have more control over policy language, terms and conditions, potentially allowing for more robust claim coverage than is available in the standard marketplace.
  • At the nexus of the two approaches lies the ability to finance multiple lines of risk in the captive and create a vehicle that smooths out volatility while still providing comprehensive coverage.
  • Finally, a captive’s access to the reinsurance market may allow for swing-rating, broader coverages or other solutions.

What’s coming?


Disclaimer

Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed subsidiaries of Willis North America Inc., including Willis Towers Watson Northeast Inc. (in the United States) and Willis Canada, Inc.

Authors

Head of Healthcare Broking, North America,
WTW

Senior Consultant, Global Captive and Health Care Practices

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