Best’s Special Report: U.K. Non-Life Market Remains Well-Capitalised Despite Reserve Strengthening for Personal Injury Claims

LONDON--(BUSINESS WIRE)-- The U.K. non-life market remains well-capitalised overall, in spite of widespread reserve strengthening associated with the reduction in the discount rate for personal injury compensation.

A.M. Best’s analysis of the largest 100 U.K. insurers by non-life gross premium income shows that the average solvency ratio under the newly implemented Solvency II regime was in excess of 150% at year-end 2016. However, capital adequacy varied considerably across the market, with ratios ranging from 91% to in excess of 1,000% for a number of companies with particularly low premium retention. The findings have been published in a new Best’s Special Report, titled, “U.K. Non-Life Market Remains Well-Capitalised Despite Reserve Strengthening for Personal Injury Claims”.

Catherine Thomas, senior director, said: “So far this year, U.K. non-life insurers have faced a number of operating challenges. Against a backdrop of strong competition, companies have had to contend with fluctuations in the discount rate used to calculate lump-sum personal injury compensation, a further increase in insurance premium tax, and ongoing uncertainty related to the U.K.’s decision to leave the European Union.”

The report states that this year to date, earnings have benefited from the absence of large flood and storm losses, but the frequency and severity of weather-related events in the remainder of the year will be a key driver of final performance.

Yvette Essen, director, research and communications, added: “Price increases have been achieved in 2017, notably in the motor sector. However, competition is still fierce and largely price-driven, particularly in personal lines, where barriers to entry are low due to a bias towards telephone and internet sales and the popularity of price-comparison websites. For small commercial risks, e-trading is becoming widespread and price-based competition in this market is increasing.”

In spite of these pressures on performance, underwriting results are expected to return to close to breakeven levels in the near term, and A.M. Best expects the U.K. non-life sector’s capitalisation to remain strong, supported by generally good risk management practices.

To access a complimentary copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=267607.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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A.M. Best

Catherine Thomas, +44 20 7397 0281

Senior Director, Analytics

[email protected]

or

Yvette Essen, +44 20 7397 0322

Director, Research & Communications -

Europe & Emerging Markets

[email protected]

or

Edem Kuenyehia, +44 20 7397 0280

Associate Director, Market Development &

Communications

[email protected]

or

Jim Peavy, +1 908 439 2200, ext. 5644

Director, Public Relations

[email protected]

Source: A.M. Best