RPS Area Senior Vice President Dave Tardif says that while rates had been increasing by around 10% prior to the final quarter of 2022, premiums have since stabilized and most renewals without a difficult claims history are now seeing flat rates at renewal.

However, some areas of the market still are challenging, with businesses in areas like New York and Florida — as well as those operating in the healthcare sector — still facing tough market conditions and rising renewal rates.

"We are still seeing different levels of retention in certain geographies," Tardif adds, "and if you're an entity with high wage earners, you are going to see that there would be a separate retention for those high earners.

"So there is a little bit of volatility in the market still, depending on those particular characteristics, but overall the EPL market has stabilized from the hard market cycle from 2019 through 2021."

But while the market continues to struggle with claims inflation and a difficult economic landscape that is creating challenging trading conditions for clients, Tardif says that insurers are once again fighting for growth after tightening their risk appetite in the immediate aftermath of the pandemic.

"Covid-19 created a lot of unknowns from a risk perspective, and insurers were wary of that," he says. "This means that many insurers reduced their risk appetite drastically, so whereas you might've had 10 capacity providers quoting for a risk, that dropped to just one or two — and those were left to do what they wanted with price because there was no competition.

"This led to the rise in rates that were felt across the market, but insurers got used to the increased levels of premiums they were bringing in. Now, they are all facing the usual growth targets, so they are all actively going after this business — and the effect of that is it is driving down costs."

And Tardif says agents also need to be aware of the impact a changing headcount has on the cost of a policy, particularly in the current economy where layoffs are becoming more frequent.

"While the exposure from an employee count perspective may be reduced following a layoff, the claims potential is still there," he says. "So even if your customer had 1,000 employees and it goes down to 750, the reasonable exposures are 750, but the 250 employees who were let go are the ones who are most likely to file suit.

"So that factors into the pricing, and you'll see that insurance companies are going to underwrite more stringently to a company that has either laid off employees recently or plans to do so in the future."

Learn more about what's next for the EPL market in the RPS 2023 US Management and Professional Liability Market Outlook.

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