2026 MARKET TRENDS

Professional Liability

Law Firms | Design & Engineering

Key Takeaways

Law firms continue to adopt AI tools despite high-profile missteps, reinforcing the need for stronger governance and source validation rather than slowing adoption
Interest in alternative business structures and potential private equity participation is increasing among law firms, mirroring broader investment activity in legal technology
Design and engineering firms are experiencing more granular underwriting, with carriers evaluating risk at the service and project-type level rather than by broad discipline
Larger firms are generally projecting stronger growth and market resilience compared to smaller firms, which face greater economic and operational pressure

In the second half of 2025, professional services firms experienced meaningful shifts in workforce expectations, technology adoption and risk considerations.

Overview

Law Firms In the second half of 2025, professional services firms experienced meaningful shifts in workforce expectations, technology adoption and risk considerations. Most law firms increased in-office attendance requirements, with many moving to four and five days per week by 2026. At the same time, use of AI tools continued to expand across the legal profession. While these tools are improving efficiency, early issues — such as errors in court filings — have reinforced the need for appropriate oversight, validation and governance as adoption grows. The industry’s financial landscape is also evolving, with increasing private equity interest in legal services and legal technology, reflecting broader investment trends. From an insurance perspective, the market has remained relatively stable, though underwriters are paying closer attention to rising defense costs and increasing valuations.

Design and Engineering Firms Design and engineering firms are also operating in an environment shaped by technological advancement, economic pressures and changing operational models. AI is influencing project delivery and internal processes, creating efficiencies while introducing new risk considerations. Economic performance varies by firm size, with larger organizations generally projecting stronger growth than smaller firms. Joint ventures and partnerships continue to increase as firms seek scale and specialized capabilities. In response, insurance carriers are refining underwriting approaches and moving beyond broad classifications to assess risk more specifically. For example, within MEP disciplines, mechanical work may be rated differently than electrical or plumbing, and transportation projects are increasingly evaluated by subcategories such as traffic planning or signage. Clear articulation of operations, risk controls and project mix will remain important as firms navigate this evolving landscape.

Market Conditions

Law Firms The insurance market for law firms remains generally stable, though targeted areas of tightening persist. Lawyers Professional Liability (LPL) rates have remained largely flat on a per-attorney basis, with most firms experiencing steady renewals, modest decreases or slight increases. Large firms continue to face a more challenging LPL environment than small and mid-sized firms, particularly as Bermudian carriers seek rate increases on higher excess layers. In cyber liability, 2025 remained competitive, with many firms achieving rate reductions through carrier changes, while incumbent carriers typically offered flat renewals with limited underwriting requirements. Assuming claims activity remains stable, this dynamic is expected to continue into 2026. Executive Risk renewals for Employment Practices Liability (EPL) have also been largely flat among domestic carriers, though Bermudian markets are pushing for higher premiums or increased retentions.

Design and Engineering Firms The professional liability market for design and engineering firms continues to reflect a balance between competitive pressure and underlying loss concerns. Carriers are citing economic and social inflation to support mid-single-digit rate increases, though competition often moderates these actions. While the market remains relatively soft, underwriting scrutiny varies significantly by project type. Firms with concentrated exposure to condominiums or large infrastructure projects may encounter fewer carrier options and higher pricing. The property and casualty (P&C) market for design firms is generally stable but increasingly influenced by technology-driven underwriting models, making exceptions more difficult to obtain. This is particularly evident for firms with auto fleets or those performing higher-risk services, such as façade maintenance in dense urban areas like New York City. At a broader level, a relatively quiet year for catastrophic losses could support continued stability, or modest softening, in the P&C market.

Impacts & Considerations

Underwriter concern is being driven primarily by two factors: rising defense costs and a shorter time horizon between claim notification and settlement. While competitive market conditions are largely keeping rates in check today, some carriers are responding by seeking higher retentions or premium increases. Although the overall outlook remains stable, the withdrawal of certain markets could affect future capacity and limit competition over time.

Law Firms To navigate this environment effectively, law firms should consider the following strategies:

Small and mid-sized firms should complete renewal submissions at least two months prior to expiration; larger firms should begin the process four months in advance
Larger firms benefit from in-person meetings with underwriters, which allow for deeper discussion of risk profile and claims management
While carriers typically prefer applications, a renewal letter or supplementing submissions with a detailed, firm-specific addendum can strengthen the underwriting narrative and help attract alternative markets

Design and Engineering Firms Design and engineering firms face similar pressures and should take a strategic, disciplined approach to renewals and carrier selection. Key considerations include:

Developing underwriting submissions that clearly highlight centralized QA/QC protocols, project intake and close-out practices and lessons learned from prior claims
Selecting carriers with a proven track record, strong claims handling and meaningful loss prevention resources
Confirming that excess carriers have the capability and appetite to step into the primary layer if needed, providing added flexibility and continuity of coverage

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