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Best’s News & Research Service - May 04, 2022 12:14 PM (EDT)

Best’s Market Segment Report: U.S. MPL Insurance Environment Remains Difficult Despite Some Improvement in 2021

  • May 04, 2022 12:14 PM (EDT)

Oldwick //BestWire// - The U.S. medical professional liability (MPL) segment’s profitability improved considerably in 2021, with the net income of AM Best’s composite group of MPL specialists rising by approximately 30%, driven by realized capital gains owing to the favorable performance of the capital markets, according to a new AM Best report.

However, AM Best notes in its Best’s Market Segment Report, titled, “Difficult Environment for U.S. Medical Professional Liability,” that it is still maintaining a negative market segment outlook on the segment, given considerable challenges to profitability from continued depressed demand, rising loss cost trends drivein by the increased frequency of high severity claims, social inflation and eroding tort reform. These challenges have resulted in persistently high underwriting combined ratios, and waning reserve redundancies over the past ten years. However, AM Best believes the segment’s reserve position now appears to have stabilized with the 2020 calendar year-end reserves. The outlook also takes into account carriers’ inability to settle often-complex claims expeditiously due to pandemic-related court closures and delays, which could further increase claims-related expenses.

Direct premiums written for AM Best’s composite of MPL insurers increased by 7.5% in 2021, to $8.4 billion, after rising 3.1% in 2020 and 4.4% in 2019. Price firming, as well as evolving industry dynamics, largely spurred this premium growth. The report notes that in the five years prior to 2021, premiums for hospitals, other health care professionals and other health care facilities grew, while those for physicians declined steadily. “The segment’s core client base has shrunk in recent years by physician group and hospital consolidations, along with the hospitals’ employment of physicians,” said David Blades, associate director, industry research and analytics, AM Best. “Today, many hospitals have their own captives or self-insurance mechanisms.”

The MPL segment’s net investment income declined by 11% in 2021, which partially offset strong realized capital gains and a reduction in underwriting losses. Despite a slight improvement in underwriting results, and the net income increase to $932 million, the MPL composite experienced a seventh-straight year of underwriting losses, and a combined ratio of 110.1 for 2021.

“AM Best believes operating and underwriting results are likely to remain pressured through the end of 2022, despite much-needed rate actions improving top-line premium revenue,” said Sharon Marks, director, AM Best. “AM Best believes underwriting and operating results are likely to remain challenged through the remainder of 2022, despite much-needed rate actions improving top-line premium revenue. Challenges brought by worsening claims severity, depressed demand and significant available capacity in the physician segment, coupled with persistent inflation and rising interest rates, are likely to limit any improvement in underwriting results.”

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=319635 .

AM Best will host an analytical briefing on the state of the MPL insurance sector on May 5, 2022, at 11:00 a.m. (EDT), featuring leading market executives and AM Best analysts. To register for the complementary event, please go to http://www.ambest.com/conferences/MPL22/index.html .

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.



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