UK non-life insurers have faced difficult market conditions in 2019, including strong competition and claims inflation, as well as political and economic uncertainty, according to AM Best, but most are well prepared for Brexit.
The ratings agency pointed to changes in the discount rate used to calculate lump-sum personal injury compensation, claims inflation due to higher repair costs and challenging investment market conditions last year.
Competition in the UK non-life market was intense in 2019, putting underwriting earnings under pressure. “Premium rates in the property sector remain depressed in spite of rising claims costs. Meanwhile, rate increases achieved for motor business have proved unsustainable as insurers anticipate the cost benefits of measures outlined in the Civil Liability Act. Planned changes to the personal injury compensation system should be positive for claims experience. However, Best notes that reforms are still to be implemented and there is considerable uncertainty as to what impact they will have on the frequency and severity of bodily injury claims,” said Catherine Thomas, senior director, analytics, AM Best.
Brexit concerns and uncertainty continue to impact the UK economy, said Best. “However, from an operational point of view, Best-rated UK-domiciled insurers are generally well prepared, and those that plan to continue to underwrite European Economic Area business have put in place arrangements to ensure that they are able to do so following a loss of passporting rights. Best also points out that for the retail non-life sector, a loss of passporting rights is not a significant issue as most insurers underwrite principally domestic business,” said the agency.
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