MPL Insurers’ Investment Income Rises, Returns Continue to Trail P&C Industry

November 3, 2026 by matray

Medical professional liability insurers continued to benefit from improving investment income in 2025, although their fixed-income portfolios generated slightly lower yields than those of the broader property/casualty insurance industry, according to a new analysis by New England Asset Management (NEAM).

The October 2026 report, 2025 Medical Liability Insurers Investment Highlights: Higher Income, Measured Risk, examined the investment portfolios and financial characteristics of 110 U.S. insurers primarily or exclusively underwriting MPL coverage. The study compared their performance with that of other P&C insurers using year-end 2025 statutory financial data. NEAM generally excluded Berkshire Hathaway from its broader industry comparisons because the company's unusually large investment portfolio, particularly its substantial equity holdings, could distort industrywide results.

The MPL composite's net investment income rate reached 3.53% in 2025, compared with 3.71% for the broader P&C industry. Although MPL insurers continued to benefit from higher investment returns, their income rate remained 18 basis points below that of the comparison group.

Fixed-income book yields also improved, rising from 4.10% in 2024 to 4.27% in 2025, marking the fourth consecutive annual increase. The broader P&C industry's book yield reached 4.38%, widening its advantage over MPL insurers from seven basis points in 2024 to 11 basis points.

The improvement reflects the higher interest-rate environment that emerged in 2022, allowing insurers to gradually replace maturing fixed-income investments with securities offering more attractive yields.

Despite the continued yield differential, NEAM found that MPL insurers maintained investment portfolios with credit quality and duration broadly comparable to those of other P&C insurers.

MPL insurers held $41.9 billion in invested assets at year-end 2025, up 3.7% from $40.4 billion a year earlier. Statutory surplus increased 3.8% to $19 billion, while net premiums written rose 6.1% to approximately $7.7 billion. Loss and loss adjustment expense reserves totaled $21.3 billion, an increase of 3.9%.

The study highlighted significant differences between MPL insurers' financial structures and those of the broader P&C industry, reflecting the long-tail nature of medical malpractice claims.

MPL insurers maintained a net premiums-to-surplus ratio of approximately 0.4, compared with 1.0 for the broader P&C industry. Their reserves-to-premium ratio was 2.8, nearly three times the broader industry's ratio of 1.0.

Despite those differences, the MPL composite's invested assets-to-surplus ratio of 2.2 was relatively close to the broader industry's 2.4.

Portfolios Remain Conservative

NEAM found that MPL insurers generally maintained conservative investment allocations while increasing their holdings of cash and short-term securities.

Bonds represented 65.2% of MPL invested assets at year-end 2025, down from 68.6% in 2024. Cash and short-term investments increased from 7.9% to 10.9%, while equity allocations remained unchanged at 15%.

Schedule BA and other investments, which include certain alternative and less traditional assets, increased from 8.2% to 8.8% of invested assets.

Using a definition of risk assets that includes equities, below-investment-grade bonds and Schedule BA holdings, NEAM found that MPL insurers' risk assets represented 57.5% of statutory surplus, compared with 64.4% for the broader P&C industry.

The MPL composite also maintained strong fixed-income credit quality, with an average rating of approximately AA-. Below-investment-grade bond holdings declined to 4.8% of fixed-income investments, continuing a shift toward higher-rated securities following the Federal Reserve's interest-rate increases beginning in 2022.

Within fixed-income portfolios, MPL insurers maintained a greater concentration in agency residential mortgage-backed securities than their P&C counterparts. Those securities represented 16.3% of MPL bond holdings, compared with 11.1% for other P&C insurers.

Conversely, MPL insurers allocated smaller shares to government and agency bonds and tax-exempt municipal securities.

The report identified a notable difference in yields on agency residential mortgage-backed securities. MPL insurers earned a 4.65% book yield on those holdings, compared with 5.20% for the broader P&C industry.

Corporate bonds remained the largest fixed-income allocation for both groups, accounting for 38.1% of MPL bond portfolios and 36.8% of other P&C insurers' holdings.

Higher Risk Associated With Higher Yields

One of the study's principal findings was that insurers assuming greater fixed-income investment risk generally achieved higher book yields.

NEAM developed a risk score incorporating portfolio duration, credit quality and convexity, which measures how securities' interest-rate sensitivity changes as market rates fluctuate.

The analysis found a positive relationship between risk scores and book yields across MPL and other P&C insurers.

Larger MPL insurers, particularly those with more than $1 billion in invested assets, tended to maintain portfolios with higher risk scores and higher yields. Smaller insurers generally pursued more conservative strategies and generated lower yields.

The study also found that MPL insurers' fixed-income portfolios had an average option-adjusted duration of 4.6 years, compared with 4.8 years for the broader P&C industry. The similarity was notable given the longer-tail liabilities associated with medical malpractice insurance.

NEAM's analysis included 110 MPL insurers, of which only 10 held more than $1 billion in invested assets. Another 32 held between $100 million and $1 billion, while 68 had less than $100 million.

The findings suggest that company size and willingness to assume investment risk may influence fixed-income yields, although the report did not determine whether higher returns adequately compensated insurers for the additional risk.

Overall, NEAM concluded that MPL insurers continued to improve investment income while maintaining broadly conservative portfolios. The industry's fixed-income yields remained modestly below those of other P&C insurers, with differences in portfolio composition and risk-taking contributing to variations in investment performance.

Aon Launches Healthcare Risk Capital Unit to Address Growing Liability Pressures

November 3, 2026 by matray

Aon plc has launched a North America Healthcare division within its Risk Capital business to help U.S. healthcare providers and their insurers manage increasingly interconnected financial and liability risks.

The new division will combine Aon's medical professional liability reinsurance expertise with its commercial risk capabilities, serving hospitals, health systems, physician groups and the insurers that cover them.

Announced Nov. 3, the initiative comes as healthcare organizations assume greater financial responsibility for patient outcomes while confronting rising liability costs, social inflation and increasingly large malpractice verdicts.

According to the Health Care Payment Learning & Action Network, nearly 29% of U.S. healthcare payments now flow through value-based arrangements that expose providers to downside financial risk.

Aon said the new division will help healthcare organizations and insurers evaluate their combined risk exposures, determine which risks to retain or transfer, and develop financing strategies using traditional insurance, reinsurance, captive insurance arrangements and alternative capital.

“Healthcare providers in the U.S. are becoming risk-bearing organizations, and the insurers that protect them face the same pressures,” said Joe Peiser, CEO of Aon's Risk Capital business. “Through our Risk Capital structure, Aon is uniquely positioned to help connect both providers and insurers with the right capital, in the right structure, at the right time.”

Aon appointed Nick Gaudiosi as North America Healthcare Industry Leader, Risk Capital, to oversee the new division.

Gaudiosi has served as senior managing director and healthcare segment leader for Aon's reinsurance business since 2025, helping develop the firm's medical professional liability reinsurance practice. He will continue overseeing that strategy in his expanded role.

Gaudiosi joined Aon in 2023 after serving as president and chief operating officer of American Healthcare Providers Insurance Services, which he led through its acquisition by Curi.

“The risks carried by health systems and by the insurers that protect physicians and hospitals are increasingly linked,” Gaudiosi said. “Bringing our reinsurance and commercial risk expertise together gives clients one integrated view of that risk and a clear strategy for financing it.”