Architects & Engineers—U.S.

Posted by on November 15, 2011 under Architects & Engineers | Be the First to Comment

Architects and Engineers U.S.The soft market cycle for most coverages, including professional liability, may be on the verge of taking a pause. There has been additional deterioration in property & casualty (P&C) underwriting results, which were, up until this point, masked by prior year reserve releases.

The reserve releases for those prior years have now slowed while, at least through the third quarter of 2011, investment returns have remained low for major P&C insurers. These two items, coupled with significant catastrophe claims from tornadoes, floods, earthquakes, hurricanes, and tsunamis, have significantly impacted the financial performance of the global and the U.S. P&C markets.

Of the top 25 commercial lines insurers, most experienced some degree of deterioration in underwriting performance over the first three quarters of 2011, with many of those carriers reporting combined ratios of greater than 100, which means that they are paying out more money than they are taking in from premiums collected. Of interest, however, is that there continues to be surplus capacity in the insurance sector despite the downturn in investments and deteriorating underwriting results. Perhaps because investors are keeping their money in the insurance market due to a lack of viable investment opportunities in other sectors.

While there remains a still-competitive environment in the commercial lines sector, including professional liability, rate decreases of past years have slowed or stopped altogether except within the small- to mid-size professional liability market where there remain more than 50 underwriting companies competing for business. However, this past May, both ACE and Zurich advised that they would no longer be entertaining new business from firms with less than $5 million in architectural or engineering professional fee revenue. Overall rates in the professional liability sector have begun to strongly trend upward outside of the small- and mid-size sector, and accounts with significant claims are seeing sizeable increases in rate.

Within the large account segment for A&E professional liability, there are roughly 30 viable competitors on a global basis. These include:

  • ACE
  • ACE Global 219
  • Alterra
  • Amlin
  • Antares
  • Arch
  • Argo
  • Aspen


  • AWAC
  • Axis
  • Beazley
  • Berkshire Hathaway
  • Brit
  • Catlin
  • Chartis (Global CAT Excess)
  • Chartis (Lexington)


  • Endurance
  • Faraday
  • Hannover Re
  • Hiscox
  • Ironshore
  • Iron-Starr
  • Liberty International
  • Munich Re


  • QBE
  • Ren Re
  • Scor
  • Swiss Re
  • WR Berkley
  • XL
  • Zurich


Approximately six of the above markets are active “lead” underwriters that will undertake the primary layer of an international program. The others prefer to act as “following” markets that will provide capacity above varying attachment points.

Again, rates in this segment appear to have stabilized, if they are not on the upswing. Underwriters in all segments are asking more questions with respect to A&E firms’ quality control, client selection, project selection, and geographic focus along with the customary questions regarding a firm’s focus on its core disciplines and remaining within contractual norms relative to levels of risk assumed.

Discussions with a number of underwriters in the A&E professional liability marketplace indicate that there appears to be an unprecedented number of large (in excess of $10 million) A&E losses, both under annual practice programs and project-specific placements working their way through the marketplace. As these losses move toward closure, one can only assume that there will be additional stress placed on rate increases, capacity restrictions, tightened terms and conditions, and perhaps, certain underwriters exiting the market altogether.

Project-specific professional liability for architects and engineers remains a product that continues to experience very restrictive terms and conditions along with very strong pricing from the carrier’s perspective. There remains a very limited market appetite for firms requiring such coverage, and premiums and deductibles remain much higher than in other sectors. Out of the many carriers that underwrite architects and engineers professional liability, there remain but a handful that will entertain project-specific placements. It should be noted that project-specific professional liability for architects and engineers remains quite competitive for projects outside of the United States, and there are more participants in that market segment. If you are an architect or engineer considering work outside the United States, it is imperative that you seek out professional advice on meeting any “in country” insurance requirements that may exist.

As always, controlling losses through solid risk management, maintaining and broadening market relationships, and having a solid broker partner to help you communicate your firm’s philosophy and ability to the marketplace remain the keys to obtaining the most competitive program available, and we are committed to delivering that result for you.


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Thomas Miller

Thomas Miller
Senior Vice President Unit Manager Chicago, IL

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