the lowdown on
President & CEO,
The Navigators Group, Inc.
an inside look at What’s Driving this important
segment of the casualty market
how is products liability different
from some of the more traditional
Products Liability differs from other
casualty products in several major ways;
first, the nature of Products Liability
exposure results in a long period of
time in which losses may develop. This
long-tail nature means there is potential for claims years after a product is
placed into the stream of commerce.
During that time, courts may develop
liability theories, new legislation may
pass and technology may change dramatically. Best practices that applied to
a product line in 1980 may no longer
apply in 2011. Secondly, the underwriter must evaluate exposures not
merely from the intended use of the
product, but also from both unintentional and intentional misuse. Thirdly,
a company’s Products Liability exposure can vary based upon who supplies
the product. For example, the potential
liability for a wholesaler of bicycles
may be different for products manufactured in the United States than for
those manufactured outside the United
States, for whom the manufacturer
may have inadequate insurance and no
meaningful assets in the United States.
from your perspective, how
competitive is the products liability
Currently, the Products Liability
marketplace is quite competitive.
There are many higher-hazard risks
being written for a fraction of what
they should be priced for. This mismatch in determining adequate prices
generally stems from not evaluating the
ultimate exposures, including misuse.
Do agents need any special training
in selling this line?
More than training, it is essential
to understand the client’s business
and entire suite of products — past,
present, and future. A clear understanding of the business of the policyholder is needed to effectively insure
Products Liability. A thorough examination of the inherent risks, controls,
and safety-related product features is
a starting point. Understanding war-ranties and safety-related instructions
is also essential. Researching incidents
involving Products Liability, product
recall, and safety-related incidence
for related product manufacturers is
needed as well. It’s all about understanding the risk so adequate coverage
can be crafted.
is it a profitable line?
Our belief is that the U.S. prop-erty/casualty industry as a whole does
not generate an underwriting profit
in Products Liability. The best performers tend to be specialist carriers
that operate within the excess & surplus lines market.
We are seeing a
with risks importing
product from overseas
include lead in toys,
melamine in food products,
and defective drywall.
have you seen a decrease in products
liability sales as a result of more
manufacturing moving overseas?
The nature of Products Liability
claims is evolving as the U.S. economy
evolves. We are seeing a replacement of manufacturing risks with risks
importing product from overseas manufacturers. This poses additional risks,
since inspection and quality control
regimens overseas tend to be far less
stringent than in the United States,
which increases exposure to ultimate
consumers. Examples include lead in
toys, melamine in food products, and
What new types of businesses are
popping up with a need for products
Life sciences are a very significant
emerging industry globally, with truly
worldwide exposures. Clinical trials
are conducted all over the world, and
the contract research organizations
that conduct them are not confined by
geographic boundaries. Within more
traditional products, we have been
asked to insure new products ranging
from electronic cigarettes to alternative energy products.
Which lines of products liability
coverage have experienced the
most growth in the last year?
Three big areas jump out for us: first,
as I just mentioned, the life sciences
business is rapidly expanding and needs
global coverage. Medical technology
hardware is another growth industry
that will continue to expand as our aging
population seeks to remain active at
later stages of life. Military and defense-related products also have experienced
growth over the last decade.