AM Best: MPL underwriting losses grew in 2024 amid 'complex landscape'

By Isha Marathe

May 14 - (The Insurer) - The medical professional liability (MPL) segment's combined ratio deteriorated to 107.7% last year from 105.4% in 2023, amid a "complex landscape" marked by rising claims severity, social inflation and falling reserve redundancies, according to AM Best.

In March 2025, AM Best maintained its stable outlook on the MPL segment, citing continued market firming and higher reinvestment rates, along with overall profitability levels, robust balance sheets and resilience.

Underwriting losses increased in 2024 due to deterioration in the loss and loss adjustment expense ratio and a reduction in the amount of favourable prior-year loss reserve development, said the rating agency.

The increase in loss and loss adjustment expenses outpaced premium growth in 2024, which led the composite to report an underwriting loss of $586 million for the period compared with a loss of $395 million in 2023.

Higher loss and defence and cost containment development trends since COVID-19 have continued with each additional year of data, resulting in increased ultimates for prior accident years and lower estimated redundancies for prior calendar year-end reserves.

The top 20 MPL writers were mostly unchanged in 2024 in terms of total direct premiums written as well as their respective market share. Additionally, there were no significant M&A transactions in 2024 after 2023’s merger of Curi Holdings and Constellation, which established Curi Insurance Group among the industry’s top 10 MPL writers, AM Best said.

“While MPL insurance has historically been a slow-moving, compliance-heavy space – that is changing quickly,” said Sharon Marks, director at AM Best.

“Rather than just selling protection, current MPL players are becoming strategic partners – leveraging AI, real-time data and external partnerships to deliver more proactive, bespoke solutions. The future of MPL insurance is not just about tinkering with legacy business models, it’s about constructing a whole new foundation.”

CAUSES AND LOOKING AHEAD

Social inflation, declining reserve redundancies and rising claims severity continue to strain the MPL segment, AM Best said. Additional headwinds include rising litigation and defence costs, the erosion of tort reform protections and evolving healthcare delivery models.

While the 2024 result marks the MPL segment's 10th straight year of underwriting losses, in terms of bottom-line profit, the composite’s net income grew for the second consecutive year, increasing 155% year on year, AM Best said.

To mitigate these trends, AM Best expects MPL insurers to focus on premium adequacy and engage in more cautious underwriting, particularly in high-risk specialties and litigious venues.

Indeed, claims severity continues to rise and has been negatively impacted by nuclear verdicts, which are driving higher settlement demands, as well as the erosion of state tort reform, with economic damages rising even in states with caps on non-economic damages, the report found.

“Social inflation, life care plans, jury anchoring, and litigation financing are often cited as contributing to the rise in excess verdicts, and jury attitudes are also trending in favour of larger damages awards for plaintiffs,” said David Blades, associate director, industry research and analytics at AM Best.

“As social inflation persists and results in higher ultimate incurred indemnity losses, underwriting results may be impacted further if pricing doesn’t keep up.”

AM Best expects that the overall MPL industry’s 2024 year-end booked net loss and loss adjustment expense reserves to ultimately be redundant by $1.3 billion, including the effect of $0.6 billion of statutory discounting. This represents a similar position compared to 2023.