The medical malpractice insurance market is improving but still not profitable


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The U.S. medical malpractice insurance (MPLI) market saw improved financial performance in 2021, but its combined ratio remained unprofitable at 108 and a return to profitability is unlikely, Fitch Ratings said.

Fitch said it expects results to improve in 2022 driven by premium growth, but “the competitive nature of the MPLI market and uncertainty over the experience of losses incurred due to volatility economy, rising inflation and any post-pandemic recovery in litigation activity” also remain difficult headwinds.

Net premiums written increased by approximately $10 billion in MPLI in 2021 following a 10.4% annual increase, well above the 4% average of the previous three years. Fitch said a recent deceleration in rate increases in MPLI, among other lines of liability, “adds concern about whether prices can keep pace with loss cost trends.”

Courts are now fully resuming operations after the pandemic. Fitch pointed to social inflation and high general inflation as reasons for the uncertainty about the severity of the losses.

Additionally, Fitch added that demand for MPLI is expected to fall due to ongoing consolidation in the healthcare industry. The rating agency cited a study by the Physicians Advocacy Institute which found that more doctors work for hospitals or corporations, which either self-insure or typically use captives.

“Large MPLI writers are adapting by expanding product and service offerings to medical facilities, but many smaller regional carriers lack the expertise and capacity to go beyond physician coverage,” Fitch said. More than 55% of premiums come from specialist MPLI-focused underwriters with limited geographic reach or the ability to deploy additional capital outside of MPLI.

The recent acquisition of NORCAL by ProAssurance could mean more M&A activity in the space, but there are “still likely more active buyers than sellers” among MPLI underwriters, Fitch said.

Medical Professional Liability Market Trends

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