Fitch’s outlook for UK non-life company market insurance in 2018 is negative as competition heats up with the growing use of price comparison websites, or “aggregators” pressurising insurers’ motor and household insurance earnings.
This is combined with the impact of new renewal transparency rules which could “add further pressure on margins as retention rates will fall if customers opt to shop around for cheaper coverage,” as well as suppressed investment earnings from low interest rates.
With most company market insurers’ ratings expected to be affirmed in the next 12-18 months, reflecting strong capitalisation and earnings despite ongoing pressures, Fitch’s rating outlook remains stable.
But this could be challenged by any sharp decline in underwriting margins and investment income that erodes capital buffers which could lead to a change to a negative rating outlook.
“Combined ratios above 100% for a prolonged period, as well as the emergence of any significant reserve deficiencies, would also lead to downgrades,” Fitch warned.
However, the rating agency said it could revise the UK non-life company market insurance’s outlook from negative to stable, “if the market demonstrates sustained positive underwriting results in most lines of business.”