August 25, 2003
Although it seems like only yesterday that I wrote the first of these Annual Messages we are now within a few months of celebrating the 25th Anniversary of the issuance of our first policy on May 1, 1979. Interestingly, we find ourselves in the midst of an insurance market that in some ways resembles the one which led to the creation of TLIE in the late 1970’s.
The insurance market for almost all types of coverages has continued to tighten and coverage is more difficult to obtain. Last year I pointed out that there were a variety of factors that have and will continue to impact the availability and price of insurance. The events of September 11, 2001, allegations of corporate malfeasance, asbestos claims, mold and the state of the financial markets (particularly interest rates) will continue to weigh heavily on the insurance market. Those events combined with years of underpricing and inadequate reserves have severely impacted the financial status of many insurers and reinsurers. The industry, in response to this situation, has reacted by withdrawing from various lines of business, restricting coverage and raising rates in an effort to repair the damage.
Attorney’s professional liability insurance has been directly impacted by these events. The impact has caused prices to rise and restricted availability. Insurers are seeking higher returns on their capital and lawyers professional liability does not meet that higher profitability criteria when other lines of insurance have seen rate increases of more than 100% in the past two years. Generally, this type of opportunistic pricing has not carried over to lawyer’s liability insurance. However, we have seen some quotes from several carriers that could be categorized as opportunistic or unreasonable in view of the risk. We believe market conditions may remain difficult for the next several years.
Once again it is important to stress the importance of professional liability insurance and TLIE’s ability to honor its commitments to policyholders. During the period May 1, 1979 through June 30, 2003, TLIE has received notices of 6,309 claims and has paid a total of $438,524,931 in indemnity and defense costs. Claims still pending will, based on our evaluations, generate another $20.6 million in costs.
We greatly appreciate your loyalty and support and we look forward to continuing our service to the attorneys of Texas.
Very truly yours,
James R. Lovell Chairman of the Board