Professional Liability E&O Market Outlook
Over the past few years, the market has seen an influx of business startups requiring the purchase of Professional Liability Errors & Omissions (E&O) coverage. We expect this trend to continue through 2025, as remote work and advancements in technology have allowed these businesses to expand in far-reaching geographies.
After a period of subdued activity, Merger and Acquisition (M&A) activity continues to grow as well, especially in the insurance industry. Factors such as stabilized interest rates, improved economic conditions, and pent-up demand are contributing to this revival. Notably, the second half of2024 saw a significant increase in transactions, setting the stage for continued activity into 2025.
Despite these conditions, evolving trends in state, federal and industry specific regulations are impacting E&O target classes of business. Particularly in regard to possible changes from the Trump administration, privacy, consumer protection concerning the dismantling of the Consumer Financial Protection Bureau (CFPB), and the emergence of artificial intelligence are now being closely monitored as we continue through 2025.
Claims
The interplay of social inflation and nuclear verdicts is significantly influencing the professional liability insurance market in 2025. The frequency and severity of nuclear verdicts have risen sharply. In 2023, there were 27 cases in the U.S. with awards exceeding $100 million, contributing to a 7% increase in social inflation—a 20-year high. This trend has continued into 2025. This has caused increased scrutiny of policyholders' risk profiles, especially in high-exposure industries. The need for enhanced risk management including robust internal controls and diligent compliance programs is essential for insurers to mitigate potential liabilities.
Capacity Challenges
Industry pricing continues to feel downward pressure with the arrival of new entrants in the marketplace. With more competitors in the marketplace, there is available capacity.
Overall, the Professional Liability E&O insurance market is evolving rapidly, with several emerging sectors and trends shaping new opportunities.