Market conditions for UK non-life insurers remained challenging in 2019 as intense competition, claims inflation, and a volatile property sector pressured underwriting earnings, according to A.M. Best.
Throughout 2019, says A.M. Best, competition across the UK non-life insurance sector was intense, driven in part by depressed premium rates in the property arena despite higher claims costs, and seemingly unsustainable rate improvements achieved for motor business in 2017.
In the property market, performance is volatile as a result of the frequency and severity of weather-related events, most notably flood. A.M. Best notes that in the first half of 2019, the weather experience in the region was relatively benign, but adds that insurance firms’ full-year results are expected to take a hit from the losses related to the floods in Yorkshire and the Midlands in November.
A.M. Best anticipates that the floods will hit both commercial and personal lines in 2019, with the Association of British Insurers (ABI) estimating the insured loss to be as much as £110 million (USD 144 million). Of this total, it’s expected that approximately 41%, or £45 million (USD 59 million) relates to personal property, £58 million (USD 76 million) to commercial property, and £7.5 million (USD 9.8 million) to motor.
In the UK motor space, A.M. Best notes that rate increases achieved in 2017 have proved unsustainable as companies grapple with fluctuations in the Ogden discount rate, which, although expected to be positive for the sector in the long-run, the reforms are still to be implemented and as such, there remains uncertainty surrounding the impacts.
“In spite of recent performance pressures, UK non-life insurers are generally well capitalised. As at year-end 2018, the combined SCR ratio of the 100 largest insurers stood at over 160%, although ratios vary considerably across the market, and solvency is expected to have remained at a robust level through 2019.
“Over the next 12 months, insurers will have to contend with strong competition, uncertainty related to legislative changes and the impact of any fallout from Brexit on the economy, demand for insurance and claims costs. In AM Best’s view, the currently robust capital adequacy of most UK non-life insurers positions them well to withstand these headwinds,” says A.M. Best.
