A&E Professional Liability Market Faces Reckoning as Claim Severity Soars

Why It Matters

Rising claim severity and defense expenses force insurers to raise premiums and tighten underwriting, reshaping risk management for design firms across the industry.

Key Takeaways

• Claim severity up, defense costs driving rate hikes
• 73% insurers plan 2026 premium increases
• Structural engineering flagged as highest‑risk discipline
• Social inflation and litigation funding reshape exposures
• Florida, Texas under heightened underwriting scrutiny

Pulse Analysis

The A&E professional liability market posted its fifth straight year of premium growth in 2025, yet the headline numbers conceal a sharp rise in claim severity. According to the Ames & Gough 2026 survey, 60 % of leading insurers reported larger loss payouts, while defense expenses surged across the board. This dual trend is forcing carriers to reassess pricing models that previously relied on steady underwriting profitability. Economic uncertainty, labor shortages, and escalating material costs further amplify the pressure, turning what appeared to be a robust market into a precarious one.

Defense costs now dominate the loss equation, with 93 % of respondents citing higher counsel fees, extensive e‑discovery, and longer case timelines as key severity drivers. At the same time, social inflation and the rise of litigation funding are reshaping exposure profiles, a sentiment echoed by 93 % of carriers. Emerging technology risks, such as AI‑driven design errors, were flagged by 80 % of insurers, while workforce shortages affect 53 %. Climate‑related perils—hurricanes in Florida and Texas, flood zones, and dense urban infill—add another layer of underwriting complexity.

Consequently, 73 % of A&E insurers intend to raise rates in 2026, most by up to five percent, targeting accounts with adverse loss histories, high‑risk projects, and vulnerable disciplines such as structural engineering. Capacity is expanding, with 80 % now able to offer limits above $5 million and 40 % reaching $10 million, often sourced from the London market. However, higher limits come with stricter underwriting scrutiny and pressure on insureds to renegotiate onerous contract clauses. Insured firms that proactively manage risk, embrace robust loss control, and push back on excessive liability demands will be better positioned to contain costs in this tightening market.