As the July 1 renewal season approaches, US hospitals are bracing for what may be the most difficult and disruptive liability coverage cycle in years.
According to James McNitt (pictured), RPS healthcare practice leader, hospitals will face a significant capacity crunch, new exclusions, and major structural shifts in how coverage is being offered amid ongoing unprofitability for insurers in this space.
“We’re calling it the ‘pain train,’ and it’s leaving the station,” McNitt said in an interview with Insurance Business. “We’ve reached a tipping point in hospital liability, and for the first time in years, the market is reacting decisively.”
July 1 marks a key renewal date for many large hospital systems. According to McNitt, the market will see a dramatic tightening of capacity and underwriting appetite at that time.
“We’re seeing exclusions right out of the gate, especially for high-severity exposures like sexual abuse,” McNitt said. “And when it comes to structuring $100 million towers, there are massive holes opening up.”
In some cases, he said, long-standing capacity providers have exited layers altogether, leaving brokers scrambling to fill $25 million gaps with carriers willing to offer only $5 million each. That translates to more participants, more negotiations, and more disruption.
Profitability has long been a challenge in healthcare liability, but the hospital segment stands out for its persistently poor performance. According to RPS’ 2025 US healthcare market outlook, a vast majority of the top ten carriers in this segment have been unprofitable for the past decade.
“With many hospital programs already running loss ratios over 100%, and expense ratios typically between 30% and 40%, it’s not sustainable,” McNitt said.
Much of the underlying pressure comes from two converging claims trends: nuclear verdicts and batch litigation. So-called nuclear verdicts, or verdicts exceeding $10 million, have become increasingly common, especially in hospital and residential care settings.
“Juries are handing out verdicts that not only bankrupt individual hospitals but sometimes entire systems,” McNitt said.
Meanwhile, batch claims, coordinated lawsuits with multiple plaintiffs, have emerged as another major threat. Frequently driven by plaintiff attorney advertising, these cases can result in outsized claims costs that insurers are struggling to manage.
To address the issue, some carriers are now requiring hospitals to carry separate, higher SIRs specifically for batch claims. “That’s not new, but it’s becoming more common,” McNitt said.
While hospitals face a tough road ahead, other healthcare sectors are seeing more favorable market dynamics. Allied healthcare, including outpatient clinics, home health providers, and pharmacies, remains relatively stable and continues to attract competition among carriers.
“These providers deal with less complex procedures and lower severity claims,” said McNitt. “You don’t see the same kind of nuclear verdicts. That keeps loss ratios manageable and underwriting appetites healthier.”
Premiums in these sectors are increasing, but largely because the businesses themselves are growing, according to RPS.
For brokers and insureds, strategies to manage this turmoil are limited. One increasingly common approach is to accept larger self-insured retentions, which can make insurers more willing to deploy capacity at higher attachment points.
“Carriers want to see insureds with more skin in the game,” McNitt said. “That can help create appetite, but it also means more financial risk for the hospital.”
Alternative risk transfer structures, such as captives, are another avenue, though many larger hospital systems may have already exhausted these options.
Looking ahead, there may be darker skies yet for the healthcare market. McNitt warned of continued contraction, not just for hospitals, but also for adjacent sectors such as senior living and social services, where many of the same carriers are active.
However, unlike past cycles, which swung sharply between profitability and unprofitability, the current market is characterized by slow-moving but persistent deterioration.
“Hospitals are a leading indicator. What happens there tends to bleed over into other areas,” McNitt said. “This segment has been unprofitable for six years – not dramatically, but just enough. Because we entered this market slowly, I think we’ll exit it slowly too.”
With few levers left to pull, brokers face the challenge of helping clients navigate a strained market with limited tools. Early engagement, strategic storytelling, and a clear understanding of each client’s risk profile will be essential, RPS said in its market outlook.
“You can’t invent capacity,” McNitt said. “But you can work closely with your carrier partners, advocate intelligently, and structure programs that make sense, even when the options are limited. That’s what this renewal season will demand.”
