Professional liability claims against architects and engineers aren't necessarily becoming more common, but they are becoming much more expensive, according to Victor Insurance.
The MGU's North American A&E Cost of Risk Report found that average claim severity rose about 62% in the US and 64% in Canada between the 10-year periods of 2006 to 2015, and 2016 to 2025, measured in nominal dollars. Even after adjusting for inflation, average severity in the US rose 19%.
“Design firms aren’t necessarily generating more claims, but when a claim happens, it costs significantly more to defend and resolve in both the US and Canada,” said Charles Williamson, Victor’s chief executive.
Rising defense and litigation costs are a major driver. Across Victor’s US A&E portfolio, about 32% of claims reported in the 2016 to 2025 period closed with expenses only, and no indemnity paid. Those claims still generated nearly $220 million in legal defense and allocated loss adjustment expense.
Victor said that shows claims can be expensive even when the design firm is ultimately not found liable or doesn’t pay a settlement.
The report also points to wider pressures on loss costs across the sector. These include construction inflation, larger and more complex projects, workforce shortages and social inflation.
Victor argued that discussions of rate adequacy should reflect the full cost of risk, including indemnity, defense costs, project economics, the jurisdiction and long-tail claim development, rather than relying on claim counts alone.
Kevin Collins, managing director and A&E practice leader for the US, said the pricing pressure in the US market reflects lessons from previous market cycles, particularly for high-hazard projects, disciplines and jurisdictions.
For brokers with architect and engineer clients, the report gives context for renewal increases that might otherwise be hard to explain. A client with a clean or stable claims record may still face higher pricing. The cost of the claims that do occur has risen sharply, and defense costs alone can add up quickly.
Victor’s own recommendations are practical. Brokers should review limits, deductibles and program structure against current project values and severity trends. They should explain pricing assumptions and trade-offs to clients early. They should also check that contracts reflect the work actually being done, as design-build and other integrated delivery models blur the line between design and construction responsibility.
The findings on defense costs also raise a structural question. Many A&E policies include defense costs within the limit, so rising legal expenses can erode the cover available for an eventual settlement. Clients working on larger or higher-hazard projects may want to consider whether their current limits are still adequate, or whether defense outside the limits is available and worth the extra premium.
