2023 Trends in Professional Liability Insurance

The AIA Trust together with the American Council of Engineering Companies (ACEC) and the National Society for Professional Engineers (NSPE) work annually to conduct an insurance carrier review and interview of professional liability trends and risk management issues.  The following are some highlights for 2023 as well as complimentary useful resources made available to you by the AIA Trust.

Professional Liability Insurance (PLI): Forecasting

  • Rates: Before looking forward, we asked the insurers about recent rate fluctuations. All but 1 response showed an increase in rates over each of the past 3 years (2020-2022). From those that provided actual percentages, the range varied from +2% to +10% over that period. Forward-looking predictions for 2023 and 2024 had similar responses but with a slightly lower percentage for the high end of the range, 8% vs. 10%. When asked what characteristic is most used in determining premium, 9 of the 14 responses stated annual billings.
  • Capacity: There is no shortage of insurers willing and able to offer professional liability coverage to the A/E segment. This creates a healthy level of competition.
  • Coverage terms: Insurers are capping limits being offered and imposing higher deductibles to offset claim activity.

Claim Trends:

Residential projects, including condominiums, continue to be associated with high claims frequency and severity.

Bodily injury claims are resulting in much higher verdicts (often referred to as ‘nuclear verdicts’) and settlements.

Insurers are monitoring the use of artificial intelligence (AI) closely. Having control of data is key to reducing risk. The feedback received during this survey was that insurers are not seeing claims from AI currently but do not rule out the chance of future claim activity.

The insurers stated it was difficult to attribute claims specifically as a fallout from the pandemic. However, there is recognition that supply chain delays and labor shortages play a role in claim dollars paid out.


Sustainability and Environmental, Social, and Governance (ESG):

There is a continued focus on environmental impact and resiliency. A/E professionals are being faced with an evolving standard of care around resiliency-focused design – – the A/E is expected to consider foreseeable harm as part of their design process. The heightened awareness of climate change intensifies as the number of severe storms grow. These storms lead to sizable property damage. Building codes may be outdated with respect to climate change considerations which adds an extra layer of complexity.

Related resources:

Article: A New Sustainable Standard for Architects

Article: Protecting Your Firm When Going Green

Webinar: Demystifying ESG for Design Firms: Risks and Opportunities – AIA Trust (theaiatrust.com)

Article: The Future Blueprint: ESG in the Design and Construction Industry – AIA Trust (theaiatrust.com)


Underwriting Challenges:

Underwriters evaluate an A/E’s risk profile by considering some, if not all, of the following: firm’s size, annual billings, geographic location, clients, professional services offered, and project types. Some of the underwriting challenges noted are listed below.

  • Residential and Condominiums projects still present a challenge to insurers. Half of the insurers participating in the survey stated their policy form has either a coverage exclusion or coverage restriction for these projects.
  • Geotechnical services are not seen as a favorable risk by many of the insurers surveyed.
  • Condominiums and apartments to condominium conversions continue to be undesirable to insurers. These projects will have greater underwriting scrutiny.
  • Some states were noted as problematic due to poor underwriting experience – i.e. Florida, Texas


Cyber Risks

    • Cyber risks are best handled via a dedicated cyber policy which provides more appropriate and thorough primary coverage. Loss drivers under this policy for all segments of the marketplace are ransomware, business email compromise (BEC) fraud and data breaches.
    • Artificial intelligence will lead to more sophisticated attacks.

Related resources:

Benefit: Cyber Liability Insurance

Tool: Cyber Risk Kit

Guide: An Architect’s Guide to Managing Cyber Threats

Article: The Threat is Real: Cyber Attacks Against Architectural Firms

Article: Take Cyber Liability Exposures Seriously


There is some future claim unpredictability due to emerging innovations such as AI as well as the demands on designs to account for climate change. As always, communicating and managing client expectations continues to be the best risk management approach in conjunction with favorable contractual language including limitation of liability.

A/E professionals should read the terms and conditions of their professional liability policy for an understanding of restrictions and exclusions that could impact the availability of coverage in the event of an incident.

All participating insurers had an impressive listing of available loss prevention tools and educational resources, which shows their desire to become a strategic partner with their insureds. We encourage you to take advantage of all available resources, including those found within the AIA Trust, to help continue building sound business and contracting practices.

Do you have questions for carriers that you’d like answered in 2024? Email us at aiatrust@aia.org and let us know!

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