Liability premiums are trending lower

ALEXANDRIA, Va.—Professional liability insurance premiums for engineers and architects are predicted to flatten out or even decrease during the next 12 months, according to a recent survey of 14 leading A/E insurance companies. The nationwide survey, conducted by the National Society of Professional Engineers’ Professional Engineers in Private Practice, along with the Risk Management Committees of the American Institute of Architects and the American Council of Engineering Companies, compiles information relating to coverage, exclusions, claim trends, and the insurer’s history, among other issues.

The survey found that through the first two quarters of 2006, the market accumulated a record surplus of $405.5 billion. As these surpluses continue to rise, premium decreases are expected to continue. However, insurers are continuing to focus on more stringent underwriting of the risks for each of their potential insureds. Those who are considered higher risk because of poor claims history or work in a high-risk sector, such as condominiums/multi-family, could experience higher rate increases or difficulty finding coverage.

The frequency of claims experienced in the A/E industry, as well as the severity of the claims, has remained fairly stable and in some cases decreased, the survey found, which is also contributing to rate stabilization. Additional downward pressure on premiums is being driven by carriers trying to enter the market or build their book of business by offering lower rates to encourage an insured away from a more established company.

Insurance carriers identified the following key issues facing the A/E industry:

• concerns regarding shared design over the Internet, such as Building Information Modeling;
• condominiums/multi-family housing creating very significant numbers of claims;
• developers/builders becoming aggressive about hunting for A/E claims opportunities because of a slowdown in the housing market;
• plaintiffs getting increasingly sophisticated in finding new ways to pursue claims for cost recovery against A/Es; and
• performance codes versus traditional building codes.

Survey responses and more information on liability and risk management topics for engineers are available online at www.nspe.org/liability/in-home.asp .