Profit margins in the UK non-life insurance sector are under pressure this year as companies fight to maintain pricing discipline in an extremely competitive market, according to a new A.M. Best special report. Premium rates are falling in personal lines and most notably for motor business.
The Best's Special Report titled "U.K. Non-Life Insurers Compete Fiercely, Brace for Solvency II Implementation", also states that regulation continues to consume considerable management time. Preparation for Solvency II has gathered pace after the approval of Omnibus II in March this year.
"Non-life insurers have made significant progress toward compliance with pillars 1 and 2 of Solvency II, covering its financial requirements and risk management and governance standards," said Catherine Thomas, director of analytics and author of the report. "However, there has been a relative lack of progress on the reporting and disclosure requirements of pillar 3, and companies will need to devote significant resources to this pillar if they are to meet the demanding requirements of the new regime by 2016."
Other key findings in the report include:
-Motor: this sector has reported underwriting losses in each of the past five years, due to inadequate pricing and poor claims experience linked to the escalating cost of third-party bodily injury claims. However, the implementation of legal reforms in April 2013 is expected to have a positive impact on claims experience.
-Property: Accident-year results improved in 2013, reflecting a lower level of weather-related claims despite significant flood and storm losses in December. The frequency and severity of weather-related events are the main drivers of performance in the UK property sector. There have been significant advances in flood risk management and forecasting in recent years, along with improved flood risk models.
|
