At the November 2011 Prof­essional Liability Underwriting Society Conference inSan Diego, the message was that in 2012, underwriters would start taking rate increases. Sure enough, they were true to their word and we saw rate increases from long-term LPL carriers take rate increases on average from 5 percent to 10 percent. After 8 years of decreasing premiums and expanded coverage terms, this was a change firms were not used to and one that continues in 2013. We're in a firming insurance market, which means premium increases and in some cases, restricted terms and decreasing limits. On the other hand, from the newer entrants in the marketplace, with immature books of claims, we haven't seen the rate increases we've seen from long- term writers of LPL insurance.

But we're not in a “hard” market. In years past, this implied carriers pulling out of the professional liability marketplace. With the number of carriers writing LPL insurance, and plenty of capacity, it's hard to believe we would ever see a hard market in the near future.

The market is firming because insurance carriers can only write a multiple of their capital/surplus base. As their capital grows, prices drop, coverage and limits are easily attainable and underwriting standards loosen a soft market. As capital shrinks and claims are paid out faster than premiums come in, prices increase, coverage becomes scarce, and underwriting standards tighten to a firming or hard market.