State of the Insurance Market Report
2025 Initial Outlook and 2024 Wrap-Up
Professional Services
Architecture & Engineering (A&E) firms and law firms have experienced a post-pandemic shift toward returning to in-office work. However, the implications of remote work impact a firms’ ability to attract and retain talent. This remains a major challenge, particularly for A&E firms.
Many design and law firms require employees to be in the office at least four days a week and there are more “billable” staff working from geographies where firms have no physical office locations. Firms remain cautious about the economy, but the first half of 2024 has provided positive financial results. Litigation remains strong while deal work has been slow.
Architecture & Engineering Firms
In the A&E world, project-specific capacity for multi-family residential and other high-risk project types remains scarce, although a new facility involving multiple insurers brings new capacity for mega projects with construction values above a billion dollars. Increased project costs cause owners to require firms to carry higher professional liability limits. Simultaneously, insurers are limiting how much they will cover in a primary policy. As a result, A&E firms are increasingly using quota share and excess layers to get the coverage limits they need.
With London markets long having employed syndicated placements (multiple insurers sharing a percentage of the primary layer), and new market entrants joining Lloyds recently, increased competition abroad is already having a “softening” effect on domestic insurers. With higher limits and multiple insurers on a single program, there is a renewed emphasis by underwriters on minimum deductibles and/or self-insured retentions. Large A&E firms manage general liability, workers’ compensation, and auto coverage costs by exploring alternative risk financing options, including captives. Captives are for liability coverage only. Property coverage must be placed on a stand-alone basis, which is especially difficult for firms located on the coast.
All available data indicates unabated growth, with U.S. and Canadian design firms seeing average annual revenue increases in the mid-single digits. Larger firms tend to grow faster than their smaller counterparts and merger activity continues as small to mid-sized firms join larger groups.
It’s hard to say whether the revenue increase in recent years is attributable to more work being done or is simply a by-product of higher construction costs. Examination of construction input costs reveals another A&E professional liability trend: twelve-month percentage changes have dropped but the price of construction inputs – concrete, steel mill products, insulation materials, crude petroleum, and fabricated structural metal – has risen more than 41% since February 2020 according to the U.S. Bureau of Labor Statistics. A&E insurers pay close attention to this as increased construction costs directly impact the price of a professional liability claim.
The passage of the Infrastructure Investment and Jobs Act in late 2021 led to more growth in horizontal projects as opposed to vertical construction. 
However, funding from the recently passed Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act and lowering interest rates could reverse that emerging trend. If historical norms continue, contractors currently experiencing less growth than A&E firms will see faster growth in 2025.
Insurers cite social inflation, erosion of caps on punitive damages, tort reform rollbacks, litigation funding, distrust of corporations, an organized plaintiffs’ bar, and higher rates for defense attorneys as factors that substantiate the need for increased professional liability rates.
Nevertheless, data from the 2024 American Council of Engineering Companies Professional Liability Insurance Survey suggests firms have experienced rate decreases and increases in equal measure for the past two years. Ample professional liability capacity caused a volatile marketplace that ironically pushed insurers to be more aggressive on new business than on renewals, as internal guidelines restrict underwriters to year-over-year rate increases.
The bifurcated professional liability market necessitates firms to collaborate with their specialty broker to compile a compelling underwriting submission that highlights a commitment to centralized risk management protocols.
Claims narratives that provide mitigating factors and/or “lessons learned” can also have a significant positive impact on renewals.
Firms with favorable loss histories — along with a willingness to approach alternative markets and provide detailed underwriting submissions — should not experience rate increases and can even hope for rate decreases. For the rest of 2024, we expect continued competition leading to more favorable terms and pricing, particularly for firms with excellent risk histories and profiles.
Interestingly, insurers share anecdotally that they are seeing more, not fewer, technical errors and that technology is a contributing factor – perhaps due to an overreliance on technology. Advancements in technology, such as generative artificial intelligence (AI), and other environmental factors require A&E risk management teams to constantly adapt and revise their approach to mitigate risk.
Law Firms
Due to recent market entrants, lawyers’ professional liability (LPL) insurance rate increases continue to moderate in 2024. Domestic markets fiercely compete with one another to win law firm business. Carriers are providing broad terms and competitive pricing to entice firms to change insurers. Small and mid-sized law firms have additional renewal options and strong firms with good or improving claims experience and lower risk practice areas are receiving rate decreases on the excess layers from domestic insurers.
For larger firms, the number of potential primary lead insurers remains limited, but newer domestic market entrants are competing for business on excess layers. New capacity in London has also joined programs in 2024. Insurers in the Bermuda market have been less competitive and have increased high excess layer pricing due to claims experience impacting those layers. Premiums are increasing and insurers are reducing their capacity. Bermudian insurers historically wrote larger lines with little to no expectation of claims activity on their layers.
Law firm merger activity has picked up with one global firm acquiring a large firm and Am Law 100 firms acquiring firms from the Am Law 101 to 200. The decrease in overall premium may lead to some domestic insurers to become more aggressive on new business.
The lateral market for young attorneys has cooled partially but the lateral partner market remains strong.
While law firms continue to be a prime target for cyber criminals, the cyber market remains competitive, if firms are willing to switch insurers. Some insurers are adding additional restrictions and coinsurance and renewal marketing is important to keep the incumbents competitive.
Management liability and employment practices liability insurance is essentially flat for firms insured in domestic market and London and up low single digits for those insured in Bermuda.
Professional Services Rate Forecast |
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| Architects & Engineers: | -5% to +5% | |
| Law Firms: | -5% to +5% | |
Layoffs and forced return-to-work policies can lead to employment practices liability (EPL) claims.
Ensure adequate coverage is in place before acting. An area to watch is proximity bias. Proximity bias is the better treatment of physically closer (i.e., in-office) workers than those who are remote.
Use follow-form policies and clearly lay out claims administration protocols when securing excess liability coverage.
Purchase extended reporting periods — or “tail coverage” — to cover the acquired firm’s prior acts of liability when acquiring smaller firms through “assets only” acquisitions.
Maintain open and transparent communication with underwriters.
Address any concerns or inquiries promptly. A collaborative relationship helps underwriters understand your risk management strategies and could result in more favorable underwriting outcomes.
Submit a detailed renewal letter instead of, or in addition to, a standardized application in your underwriting submission.
Provide a comprehensive overview of your operations and claims history. Offer details on risk management including updated policies and procedures (including AI), IT improvements, claims prevention, and risk mitigation.
Hold in-person meetings with underwriters for large and mid-sized firms.
Consider working with managing general underwriters (MGUs), as they are a faster, more efficient way to secure additional insurance capacity.
MGUs provide access to new capacity via specialized and experienced underwriting, streamlining the renewal process.
For fresh insights on your existing insurance programs or to develop comprehensive and creative new solutions, our team of specialists is ready to help you manage your risk and prepare for the unexpected.
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Our industry and product line specialists have collaborated to provide an update on current trends and market conditions. We invite you to explore their insights by downloading our latest State of the Insurance Market Report.