Results from A&G’s 2021 insurance survey

May 09, 2021

All indications point to 2021 being a year when more buyers see higher rates for their professional liability insurance.

Despite the surprising resiliency of the U.S. construction industry during the COVID-19 pandemic, many insurers providing architects and engineers professional liability insurance have concerns about the prospects for the U.S. economy in 2021. Simultaneously, even as their premiums generally grew last year, these insurers also had worsening loss experience prompting them to consider more significant rate actions this year.

As they reformulate their business plans for this year and beyond, design firms may want to consider how their growth and operational strategies might impact their risk and insurance programs, including related costs. Here are 10 takeaways from the Ames & Gough 2021 survey of 20 leading insurance companies providing professional liability insurance to AEC firms in the U.S. that offer insights on factors influencing their decision-making:

  1. Insurers concerned about deteriorating claims experience. Nearly half the insurers surveyed reported their claims experience worsened in 2020, while the other half indicated their claims were similar to the previous year. These realities are shaping how insurers view their relationships with AEC clientele, including policy pricing, terms, conditions, and available capacity in 2021.
  2. Rate hike requests may be more widespread. While 57 percent of the insurers surveyed plan only modest rate increases of up to 5 percent in 2021, one in four expect to raise rates by 6 percent to 10 percent and one in five expect to raise rates above 10 percent. Although insurers applied targeted rate increases in previous years based on an account’s loss experience, project mix, disciplines, and even geography, more now plan to seek higher rates across their entire book.
  3. Insurers sharpen focus on risky projects. One in four insurers surveyed reported having more claims associated with certain project types, such as residential and infrastructure. As a result, underwriters look carefully at a design firm’s project mix in considering a potential rate action. While many design firms are looking for new growth opportunities, they need to recognize that project mix changes may affect how underwriters approach their policy renewals.
  4. Higher-risk disciplines continue to draw underwriter scrutiny. Concerning their underwriting assessments, 95 percent of the insurers surveyed cited structural engineering as the top discipline in terms of risk, followed by geotechnical engineering (75 percent) and architecture (40 percent). Insurers’ historical claims data indicate higher claim frequency and severity coming from these disciplines. This leads insurers to apply higher rates to address historically elevated claims costs associated with these disciplines.
  5. Rising claim severity, a troubling trend. Insurers were acutely concerned about a trend toward greater claim severity, especially related to high-risk projects and disciplines. Not surprisingly, insurers’ most significant claims involved bodily injury, design defects, property damage, or construction delays. Most insurers surveyed paid a multimillion-dollar claim in 2020: 45 percent paid a claim between $1 million and $5 million, and one in four paid a claim exceeding $5 million, including 10 percent paying a claim between $10 million and $20 million.
  6. Some insurers push back on higher limit requests. A key indicator of the market tightening involves insurers’ responses to the growing number of requests for higher liability coverage limits. Although higher limits of $5 million and above continue to be available, these requests now are typically thoroughly vetted by the insurers. In light of these developments, design firms may want to check with their clients to make sure any requirements for higher limits align with the project risk or if they’re disproportionate given the scope of work.
  7. More insurers examine increases in regional claims activity. Even though most insurers (60 percent) in this year’s survey indicated that no specific geographic area had an increase in claims activity, that’s a decline from last year when 73 percent reported no such trend. Notably, among those citing regional claim activity, 40 percent saw more claims in the Northeast and 35 percent in the Southwest. Meanwhile, 30 percent saw more claims each in the Southeast and West Coast. The higher claim levels can be explained in part by greater business activity in each of the areas. Nonetheless, some insurers are considering applying higher rates to firms with a concentration of projects in areas associated with higher claim activity.
  8. Additional red flags for insurers: project delivery, complexity. Insurers also had underwriting concerns about fast track and designer-led design/build project delivery, construction complexity with increased costs, and public-private partnerships. Design firms expanding their involvement in these types of arrangements should recognize that some insurers are taking a closer look at them in terms of potential risks they represent.
  9. Warning signs on cyber-risk. The COVID-19 pandemic and remote working arrangements left employers in all industries more vulnerable to cyber-attacks, including those involving ransomware. In this environment, design firms should take advantage of the pre-breach services available through their cyber-insurance policy to identify potential system vulnerabilities. In addition, putting the appropriate security measures in place to help mitigate a cyber-attack is becoming a critical component for meeting insurance underwriting requirements to obtain or renew insurance coverage.
  10. Practicing sound risk management remains key for AEC firms. The good news is that despite all the concerns, there’s still some competition in the professional liability insurance marketplace. Nonetheless, the beneficiaries among design firms of any favorable conditions that remain this year will be those with clean loss histories, lower risk disciplines, projects, and sound risk management. However, for the most part, all indications point to 2021 being a year when more buyers see higher rates for their professional liability insurance.

To obtain a complimentary copy of the Ames & Gough survey, PLI Market 2021: As Claims Experience Deteriorates, Insurers Seek New Rate Hikes, email

Joan DeLorey, senior vice president and partner, Ames & Gough, and Jared Maxwell, vice president and partner, Ames & Gough. Joan DeLorey can be reached at; Jared Maxwell can be reached at

Click here to read this week's issue of The Zweig Letter.

About Zweig Group

Zweig Group, three times on the Inc. 500/5000 list, is the industry leader and premiere authority in AEC firm management and marketing, the go-to source for data and research, and the leading provider of customized learning and training. Zweig Group exists to help AEC firms succeed in a complicated and challenging marketplace through services that include: Mergers & Acquisitions, Strategic Planning, Valuation, Executive Search, Board of Director Services, Ownership Transition, Marketing & Branding, and Business Development Training. The firm has offices in Dallas and Fayetteville, Arkansas.