PLUS MEDICAL SYMPOSIUM 2015 – BETTER BUCKLE UP!

Attending the PLUS Medical Symposium each year is a great way to stay abreast of significant developments in the world of medical malpractice. For me the primary attraction of this annual event is the opportunity to check in with the majority of our carrier partners in one place and over a short period of time. This allows me to come away with a strong sense for where we are in the market cycle, which in turn gives me information I can use to tweak my business plans and manage my retail customers’ expectations. This year my many conversations and observations has me coming away with the distinct impression that medical malpractice is trying to find the bottom of the market cycle. That means we are in for a rough ride.

The key takeaways that have me thinking the market is at or near the bottom are as follows:

• Physician Writers Flush With Cash

Physician writers across the U.S. continue to lose significant amounts of premium volume due to ongoing physician group merger/acquisition activity, and their collective combined loss ratio is pushing up to and beyond 100% for the first time in over ten years. And yet many are flush with cash. This is in large part due to robust underwriting profits in past years and the ability to continue taking down loss reserves on past years. Many of these carriers are looking for ways to deploy their capital and a number of the larger players have decided to put it to work going after medical facility classes of business – a segment that is already very soft.

• E&S Carriers Pulling Back

Creating some resistance to that downward pressure on pricing is the fact that many carriers writing med-mal in the E&S world are beginning to pull back. Since the peak of the last hard market E&S carriers, with their lack of filed rates/credit application methodology, have perhaps been even more aggressive than carriers writing med-mal business on an admitted basis. After more than 10 years of a softening market cycle we are hearing that a number of these E&S carriers have books of medical professional liability business that are heating up and this is forcing a change in behavior. Some of these carriers are pulling back only with respect to certain classes of business. Others are trying to take rate across the board. Collectively this is having somewhat of a neutralizing effect on the impact of the inflow of new capital into the healthcare space.

• Carrier Merger/Acquisition Activity

One recent development to keep an eye on is the increasing carrier merger/acquisition activity that will certainly have an impact on the medical malpractice arena. For example, XL and Catlin just announced the completion of their merger. Ironshore just announced a planned acquisition by Fosun International Limited – part of a China-based investment conglomerate. Rumor has it a couple of other significant carrier players in the med-mal space are on the sales block as well.The ultimate impact of this merger/acquisition activity on the world of med-mal is anyone’s guess at this point. Still, it seems to me the general trend is the replacement of venture capital/short term horizon money with owners that have a longer term view of the business. This should ultimately have a stabilizing influence on the world of medical professional liability and may ultimately be one of the primary drivers of a firming trend.

All things considered, I believe we have another 3 – 4 years before the med-mal market finds the bottom of the trough we are currently in and begins to firm in a meaningful way.  In the meantime, we at Ethos will utilize our underwriting relationships and substantial experience in the medical malpractice space to effectively deal with the increasing volatility in pricing, coverage terms and appetite we can expect going forward.

Buckle up folks, it’s going to be a wild ride!