Despite increased losses, depreciation of capital and historically low investment yields, the UK non-life insurance is stable, according to the latest Fitch report.
The report also predicts that with Solvency II on the horizon, 2012 will see an increase on merger and acquisition activity.
“Smaller franchises and insurers unable to repair balance sheets weakened by the unprecedented catastrophe losses incurred during 2011 are viewed as primary targets for [merger and acquisition] activity,” says Martyn Street, Director in Fitch’s Insurance team.
The agency forecast’s a reduction in earnings for the sector for both 2011 and 2012. The main reason for this is a reduced level of investment income of around GBP3.5 billion for 2011 (compared to GBP9.1 billion in 2010) and GBP5 billion for 2012.
The predictions are ratings are based on the assumption that the UK will continue to see a slow, but steady economic recovery in the UK, with modest GDP growth.
The full Fitch report, titled “2012 Outlook: UK Non-Life Insurance – Testing Times Ahead: Economy and Regulation Present Key Hurdles in 2012”, is available at the Fitch Ratings website.
