Legal liability insurers beat casualty market

The specialist group outperformed commercial casualty in 8 of the past 10 years.

Legal professional liability insurers have seen a significant increase in policyholders' surplus over the last five years, even though premium levels stayed relatively flat during the same period.

Limited geographic market reach has restricted premium growth for a group of 16 insurers tracked by AM Best. 

“Emerging liability risks that lawyers and law firms need to navigate concerning AI adoption, cybersecurity, and increased regulatory or legislative scrutiny supported the need for increased LPL insurance premiums,” said Dylan Catania, associate analyst, AM Best.

Since the pandemic, operating performance within this specialist group has varied more widely than in the broader commercial casualty sector. 

However, the legal liability group recorded a better operating ratio than the commercial casualty market in eight of the past 10 years. 

In 2024, the specialist group posted an operating ratio of 58.7% compared to 84.7% for commercial casualty.

Year-over-year premium growth has risen modestly since 2020, averaging low single-digit percentage increases annually between 2021 and 2025.

In total, annual direct written premiums for the tracked group increased by more than 18% from 2020 through 2025.

This followed a period of stagnation between 2015 and 2019, when premiums grew by less than 1%.

Recent insurance rate increases have remained primarily in the single digits. Specialists in this market face heavy competition from established multinational insurers such as Chubb and AIG, meaning smaller firms must rely on product innovation and customer service to stay viable.

AM Best industry research director David Blades noted that whilst the market appears healthy despite intense competition, insurers must still manage significant risks from complex fraudulent claims and cybersecurity threats.

The sector is also dealing with the impact of social inflation.

Legal liability insurers have recorded higher loss adjustment expense ratios than commercial casualty firms for five consecutive years, partly because the claims-made nature of the coverage raises legal expenses.

Whilst the overall frequency of claims against law firms has remained relatively stable, the severity of these claims has risen. 

This increase is driven by escalating defence costs and a growing number of claims exceeding one million dollars. 
Rates hardened after 2020 due to these trends and pandemic-related inflation.