Cautious insurers will keep PI costs high
Professional indemnity (PI) insurance for financial planners is unlikely to get cheaper as insurers continue to remain cautious about their exposure to the sector according to global insurance broker Marsh.
In its Pacific Insurance Market Report released yesterday Marsh National Manger, FINPRO Placement Services Paul Ducat stated that market conditions for professional liability remained soft in the last quarter of 2014 with insurers reviewing the profitability of the accountancy and real estate/property managers.
However insurers were either keeping away from financial planners or lifting the requirements at which they would provide PI insurance according to Ducat.
"Insurers continued to demonstrate a lack of interest for what they consider to be high-risk categories such as financial service providers (particularly financial planners) and property valuers, with cover being offered by an increasingly limited number of insurers," he said.
"As a result, these insurers are requiring that clients provide significantly more detailed information and knowledge of their businesses and practices."
Concerns also remained about the possibility of further claims by financial institutions with Ducat stating they were being treated with caution by insurers who were continuing to examine claims and notification histories in the wealth management sector.
"Coupled with the potential for further economic uncertainty in 2015, the flagging of further reviews on capital requirements, and the seven-year statute of limitations anniversary looming from the global financial crisis, insurers remain guarded and pressured to increase their reserves due to past loss years," Ducat said.
Although generally trending flat, the professional indemnity line could potentially experience rate increases. In cases where insurers are unable to obtain rate increases in their financial institution's professional indemnity portfolios, they are alternatively seeking increased deductibles and/or tighter control on the limits and capacity provided on each risk."
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