Best Revises US Medical Professional Liability Outlook to Stable

A.M. Best has revised its outlook for the US medical professional liability (MPL) insurance segment to stable from negative.

The rating agency cited the MPL segment's improved rate adequacy, diminishing impact from pandemic-related exposures, persistently redundant loss reserves, higher reinvestment rates, and improved overall returns in announcing the outlook change.

In Best's Market Segment Report, Market Segment Outlook: US Medical Professional Liability, Best noted the MPL segment's proven ability to adapt to various market cycles despite tort reform challenges.

However, the rating agency said that offsetting factors in its changed outlook for the US MPL segment include a shrinking pool of solo practitioners, persistent economic uncertainty, equity market volatility, rising reinsurance costs, greater claims severity, and persistent social inflation.

Best said that as the legal system reopened after the COVID-19 pandemic and became fully operational at the end of 2022 and in 2023, the anticipated significant negative impact on MPL insurers' loss ratios proved to be minimal. The segment successfully navigated changes related to pandemic-related claims and tort reform challenges, Best said, doing so by implementing rate increases and achieving premium growth every year since 2017.

Despite those advances, the MPL segment faced another year of underwriting losses in 2022, Best said.

"Given the segment's generally robust balance sheets, investment income remains a key driver generating overall returns on revenue that exceed industry averages," Vicky Riggs, associate director at A.M. Best, said in a statement. "This should play an even larger role as interest rates remain higher for longer. Further appropriate pricing adjustments should also drive additional positive momentum in 2024."

In addition to escalating burnout rates, staffing shortages, and continued growth of alternative care providers, Best said that the potential impacts of increasing loss frequency remain to be seen. The Best report suggested that the potential for those trends to have a negative impact on loss frequency while severity continues to increase could impede the progress the US MPL segment has made in recent years.

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