Bermuda-based re/insurer Hiscox says $5 million-plus US hospital liability losses are trending significantly higher, posing a threat to excess insurers’ results.

Industry research by the company found that the frequency of large hospital liability losses of $5 million or more has risen over the last ten years and is set to increase further in the next three years.

That could mean more demand for the kind of professional liability cover offered by several companies in the Bermuda market, including Hiscox, Allied World and Endurance - but also heavier claims.

With large losses making up around 0.25 percent of the insurance industry’s US hospital liability losses in 2000, that figure has risen to 0.7 percent currently and is set to increase to one percent by 2013, Hiscox said.

After a period of heavy and sustained losses in the 1990s, US hospital professional liability cover has largely produced good returns for the insurance industry over recent years but Hiscox warns the industry might be on the verge of repeating some of the same mistakes again, as flat or dropping attachments threaten ongoing profitability.

Nick Williamson, health care actuary at Hiscox Bermuda, said: “More than half of all historical claims greater than $5 million have been paid in the last five years and there is concern not just that these are growing but also that the $2 million and $3 million losses become $5 million and higher as well.

“If the recent trend continues, as our research suggests it will, then layers over unchanged retentions are already in serious danger.”

The trend could worsen excess insurers’ results “considerably”, he suggested.

Hiscox has urged the industry to refocus on the real indicators of hospital risk such as their location, financial performance, commitment to IT (particularly in patient safety) and quality scores as opposed to less revealing circumstantial factors such as whether they are a teaching or non-teaching hospital, or for-profit compared to not-for-profit.

Ian Thompson, senior vice-president, health care, at Hiscox Bermuda, said: “Revealingly, most hospitals, despite the financial climate and uncertainty over reform, are buying more limits to protect themselves against increased larger losses,” Mr. Thompson added.