The UK home insurance market has enjoyed a significant spell of profitability – however, it looks that period might be about to end.
According to an EY analysis, the home insurance market is set to post a 99% net combined ratio – and this is working on the assumption that there will be no major flooding in the UK before the end of the year. If a reserve release was necessary, insurers are likely to be in the red with a 101% combined ratio.
It seems that the situation is likely to get even worse during 2017.
The report outlines that providers are struggling due to the low interest rate environment with expenses climbing. Claims inflation has reportedly climbed by 2.3% year on year; while rate deflation has dropped by 1.8%.
The figures have been further hit by a 4% rise in insurance premium tax, coupled with the introduction of the Flood Re levy.
Speaking about the results, Tony Sault, the UK general insurance leader at EY, noted that “if the UK is hit with damaging weather towards the end of the year… the modest profitability we are predicting will be lost.”
With the pound weakening and import prices also rising, a bleak outlook is predicted with EY expecting a net combined ratio of 101% in 2017.
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