A.M. Best Special Report: U.S. Medical Professional Liability Sector Sees Solid Results Despite Growing Headwinds, Deteriorating Profitability

OLDWICK, N.J.--()--A.M. Best views the U.S. medical professional liability (MPL) insurance sector as being stable, underpinned by strong capitalization and profitable, albeit declining, operating performance, in conjunction with the prospect for positive earnings in the medium term. In addition, stable claims frequency and reserve redundancies should continue to offset soft market pricing, modest increases in claims severity and weak investment markets, according to a new A.M. Best special report.

The latest Best’s Special Report, titled “Medical Professional Liability Sector: Solid Results Despite Growing Headwinds and Deteriorating Profitability,” states that although many of the financial aspects point to a favorable near-term outlook, MPL carriers face numerous business challenges in the years ahead. According to the report, many MPL insurers have capital that they are finding difficult to deploy, as new market opportunities in their core client base continues to migrate from private practice to hospital employment.

The report states that the MPL insurance segment reported an underwriting loss in 2016 of $164 million in 2016 after 10 years of reported underwriting profitability, and an $82 million underwriting gain in 2015, reflecting the ongoing margin compression of recent years. The increase in loss and loss adjustment expenses incurred and a decrease in net earned premiums, along with a slight increase in non-acquisition-related underwriting expenses, resulted in the segment’s combined ratio deteriorating to 102.9 from 99.2 in 2015.

Despite the decline in profitability, capitalization in the MPL insurance sector remains solid, as its prospects for positive earnings over the medium term favor the stable outlook. Modest increases in claims severity should continue to be offset by decreasing claims frequency trends and lower levels of reserve redundancies. However, A.M. Best believes challenges abound, as changes in health care delivery, tort reform, the emergence of new medicines and surgical procedures, the migration of solo practicing physicians to group and/or hospital employment, cyber security, the influx of insureds into the health care system, a highly competitive market and low interest rates, all contribute to the importance of having strong enterprise risk management.

To access a copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=261453.

To view a video about the report with A.M. Best Senior Financial Analyst Dan Teclaw, please visit http://www.ambest.com/v.asp?v=medmal517.

A.M. Best also will host a webinar focused on the state of the MPLI market. This complimentary event will take place today, May 11, at 1:00 p.m. (EDT). To register go to http://www.ambest.com/webinars/medical17.

A.M. Best is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.

Contacts

A.M. Best
David Blades, CPCU, 908-439-2200, ext. 5422
Senior Industry Analyst –
Industry Research & Analytics
david.blades@ambest.com
or
Christopher Sharkey, 908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Charles M. Huber, 908-439-2200, ext. 5122
Director
charles.huber@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Director, Public Relations
james.peavy@ambest.com

Contacts

A.M. Best
David Blades, CPCU, 908-439-2200, ext. 5422
Senior Industry Analyst –
Industry Research & Analytics
david.blades@ambest.com
or
Christopher Sharkey, 908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Charles M. Huber, 908-439-2200, ext. 5122
Director
charles.huber@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Director, Public Relations
james.peavy@ambest.com