In a recently published report Standard & Poor’s Ratings Services said that it believes “underlying underwriting performance in the U.K. non-life insurance industry has come under increasing pressure from margin erosion.”
The report, “Price Rises Give Cause For Cautious Optimism Over Underwriting In The U.K. Non-Life Insurance Market“, analyzes the performance of U.K. non-life risks written by insurers. “We believe that this margin erosion has largely been masked by reserve releases overall, although our analysis of the motor, property, and liability classes show varying impacts from reserve movements,” said S&P.
In addition the prevailing low interest rates and the “conservative investment strategies that insurers have maintained over the course of the financial turmoil of the past two or three years” have hit returns on investment.
On the upside, S&P said it “is no surprise, therefore, that evidence of real price increases has emerged over the past nine months or so, especially in motor insurance.”
Credit analyst Nigel Bond indicated: “These price rises should, in our view, lead to an improving underlying underwriting performance, but the extent and longevity of this improvement is not yet clear. We think the actions of industry leaders, particularly actions that support strategic risk management, will determine how the cycle develops in each class of business.”
The report is available to RatingsDirect on the Global Credit Portal subscribers at www.globalcreditportal.com and RatingsDirect subscribers at www.ratingsdirect.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to research_request@standardandpoors.com. Ratings information can also be found on Standard & Poor’s public Web site by using the Ratings search box located in the left column at www.standardandpoors.com. Alternatively, call one of the following Standard & Poor’s numbers: Client Support Europe (44) 20-7176-7176; London Press Office (44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm (46) 8-440-5914; or Moscow (7) 495-783-4011.
Source: Standard & Poor’s
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