THE STATE OF THE MARKET
Across the U.K. professional indemnity (PI) insurance market as a whole, insurers are currently operating on the leanest of margins. Fueled in part by the economic downturn, an increasing frequency of claims has pushed insurers’ loss ratios close to or beyond the 100 percent mark, leaving many PI accounts in the red. Nevertheless, with attractive investment opportunities notably thin on the ground elsewhere, the insurance market globally remains awash with capital, unleashing strong downward pressure on rates as insurers compete to deploy their capacity.
As a result of this pressure, rates across the PI market are generally close to record lows. There are, however, one or two significant exceptions to this rule, where specific fears of soaring claims activity have forced insurers to insist on higher premiums or to withdraw from offering cover altogether. One of these exceptions relates to surveyors undertaking valuation work.
If a lender incurs losses due to a proven overvaluation, it should of course be entitled to compensation for those losses to the extent that they result from the surveyor’s negligence. Some lenders appear inclined, however, to seek to rely upon surveyors’ PI policies as a kind of product guarantee, even in the absence of any clear evidence of negligence on the part of the surveyor. If the value of a property falls following valuation, such a lender may prefer to bring a speculative claim against the surveyor, alleging overvaluation, rather than accept the commercial loss without challenge. Such claims can rarely be disposed of easily and, regrettably, some will inevitably succeed.