Recent years have seen many changes affecting the market for professional indemnity insurance. The law is changing, widening the scope of liability. The insurance market is changing, with more mutuals and captives being formed. The price and availability of insurance are changing, too. The internationalization of professional firms has introduced new problems, with claims being brought in the jurisdiction perceived as most favourable to the claimant. The broadening range of services offered by individual firms, and the consequent growth of truly multidisciplinary firms, can only make the situation more complex. Like many other insurance markets, the market for professional indemnity insurance is cyclical. In the two or three years following 1984 most premiums more than doubled in real terms, and deductibles rose significantly. At the same time capacity fell. The result of all this change is that professionals are considering their indemnity insurance needs in a new light. The main reason for buying insurance is to provide a smooth cash flow. This need has not been met in the recent past. We therefore believe that now is an appropriate time for the attention of actuaries to be drawn to professional indemnity insurance.
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