Fitch Ratings expects UK non-life insurance premium rates to rise more quickly over the next 12 to 24 months as insurers seek to improve returns on capital, according to a new report.
“While it is generally considered that the catalyst for widespread rises in insurance premiums tends to be the occurrence of major insured losses, Fitch believes that insurers’ need to maintain adequate returns on capital will result in a general upturn in premium rates over the next two years,” says Martyn Street, Director in Fitch’s Insurance rating team.
Motor insurance underwriting performance continues to be a focus. Insurers have continued to raise premium rates sharply, with the 17-22-year age category seeing the cost of personal motor insurance rising by 65% in the year to April 2011. Fitch views these price rises as essential for motor insurers to return to technical profitability but also sees an opportunity for insurers to differentiate their performance.
“Companies that successfully address the key issues of widespread detection of fraudulent claims and controlling the steep rise in settlement awards for bodily injury claims will hold an advantage over competitors that remain solely focused on pricing adjustments,” Street says.
The occurrence of further major insured loss events, including the forthcoming US windstorm season, will be a key determinant of London Market insurers’ credit ratings for the remainder of 2011.
The outcome of the June and July renewal period, during which a significant proportion of US catastrophe-exposed insurance is renewed is an important indicator of the sub-sector’s near-term profitability. It remains unclear to what extent the sequence of catastrophe losses focused across the Asia-Pacific region and recent revisions to Risk Management Solutions (RSM) US Windstorm Model will have on US renewal prices.
Fitch’s report “UK Non-Life Insurance – Profitability: Capital is Both the Problem and the Solution” is available on Fitch’s website.
Source : Fitch Ratings
