Best Report on UK PC/: Rates Rising; Operating Environment Still Tough

October 6, 2010

A special report from A.M. Best concludes that the UK non-life market will “remain tough this year, with insurers facing diminishing prior-year reserve redundancies, low investment returns and the uncertain effects of the economic downturn on claims experience.”

Best’s report highlights the following trends:
— Premium rates are at least rising, particularly in the motor sector, and this should lead to an improvement in accident year performance. However, a corresponding improvement in calendar year performance is unlikely, with the positive contribution of prior-year releases expected to diminish.

— The broad-based rate increases that emerged in 2009 are expected to continue throughout 2010, with the largest movements in the motor sector.

— Price improvements should counter an anticipated increase in claims experience, leading to better accident year performance. However, calendar year results are not expected to improve, with prior-year reserve redundancies expected to reduce.

— To date, recession-related loss experience has been below A.M. Best’s initial expectation, but it is unlikely that insurers have yet experienced the full impact of the economic downturn on claims frequency and severity.

— Low fixed income returns mean insurers cannot rely on investment earnings to offset weak underwriting performance, which should further increase insurers’ focus on technical pricing and expense control.

— The implementation of Solvency II is fast approaching and consuming a significant amount of UK insurers’ time and resources.

A copy of the special report is available.

Best will host an Insurance Market Briefing on the state of the European insurance sector and London Market at the Grange St. Paul’s Hotel on Wednesday, 13 October, from 8:30 a.m. to 12:30 p.m., with a networking lunch to follow. There is no charge to attend this event or to register .

Source: A.M. Best

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