The professional indemnity market will remain subdued for the next year, with a projected softening of 5%, according to Taylor Fry. 

The actuarial firm presented an update on the sector to the Australasian Professional Indemnity Group conference last week.

Overall general insurance profits were still strong in FY 2026 compared with historic levels, though down from the 2025 high of $7 billion. The home market was still challenging, inflation is high and the commercial market was predicted to be soft for some time. 

For PI, underwriting profits in FY26 were $538 million, similar to the previous year, with both years bolstered by releases of prior year reserves. This is expected to fall in FY27.

In Taylor Fry’s analysis, the current year gross loss ratio was assumed to be around 70%, with reserve releases reducing that to around 46%.

PI gross and average written premium were down 3% from 2025 to 2026, continuing the soft market which started in 2023.

Premium reductions would be concentrated in D&O, the firm’s report found, which follows a 36% reduction in recent years as shown in APRA’s National Claims and Policies Database.      

But there has been a significant rise in medical indemnity premiums, which will continue this year. Medical malpractice premium has grown by 37%.

There were also variations depending on occupation, with engineering and financial premium falling by 10%.  

Taylor Fry principal Scott Duncan said that the 2026 PI loss ratio was 65%, a significant shift from the 100% of 2021 “so we’re in a very different situation from where we were five years ago”.

The firm’s analysis showed PI and directors and officers claims costs are tracking lower over recent years, driven by fewer claims.

Taylor Fry also assessed use of AI by various occupations and the possible implications for PI.

While impacts on employment levels would vary, the firm said smaller teams may service more clients, increasing exposure per professional.

Fewer junior staff being trained on foundational work may make it harder for them to effectively review work as they progress. AI also increases aggregation risk, with the same error being replicated across engagements and clients.

The firm warns that AI exposure may be "silent", with the extent and nature of AI use in underwriting hard to see, and AI-related errors in claims appearing as ordinary professional negligence.