Despite a second-straight year of underwriting losses, the U.S. medical
professional liability insurance sector's net income rose 50% year over
year as realized capital gains increased threefold, according to a new
A.M. Best report.
The Best’s Special Report, titled, “Myriad Challenges Test the
Mettle of Medical Professional Liability Writers,” notes that continuing
changes in health care delivery, the migration of private practice
physicians to large physician networks and hospitals and mergers and
acquisitions among physician groups and hospital systems are just some
of the issues impacting this segment. As a result, A.M. Best
assigned a market segment outlook of negative for the medical
professional liability (MPL) market.
The report also stated that slumping demand and competitive pricing
resulted in a decline in the segment’s 2017 premiums. Direct premiums
written (DPW) for the composite of carriers whose primary line is
medical or hospital professional liability insurance was down 1.9% in
2017 to $6.8 billion, following a 1.8% drop in 2016. Demand continues to
decline owing to the increased consolidation, and in certain instances,
business is being fronted and then passed on to the alternative risk
transfer market. Larger groups and hospitals tend to self-insure and use
alternative risk transfer options.
Despite the current challenges being faced by MPL insurers, recent
operating history has been favorable. The MPL composite reported a
marginal net underwriting loss in 2017, even though the combined ratio
improved to 100.1 from 101.6 in 2016. However, realized gains increased
more than threefold, and investment income was relatively stable. As a
result, net income increased to more than $1.1 billion from $764 million
in 2016, despite the tough market dynamics and deteriorating profit
A large number of MPL insurers have amassed substantial amounts of
capital on their balance sheets in the last decade and are trying to
find ways to deploy that capital in the marketplace, seeking new
opportunities to combat a declining core client base. The expansion of
operations beyond established jurisdictions and extending into other
product lines, in some cases through the formation of risk retention
groups or mergers and acquisitions, are among the ways MPL insurers have
been reacting to market conditions in recent years. With a health care
system still in flux amid a continuing opioid epidemic, along with
persistently competitive pricing and shrinking profit margins, MPL
insurers are navigating very choppy waters.
To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=273402.
For a video on the special report with A.M. Best Director Charles M.
Huber, please visit http://www.ambest.com/v.asp?v=mplireport518.
A.M. Best is the world’s oldest and most authoritative insurance
rating and information source. For more information, visit www.ambest.com.
Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its
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