UK non-life insurers face further earnings pressure – AM Best

Negative outlook driven in part by property lines volatility

UK non-life insurers face further earnings pressure – AM Best

Catastrophe & Flood

By Terry Gangcuangco

Non-life insurers in the UK are facing additional pressure on earnings following the latest wave of bad weather in the country, according to AM Best.

In a commentary, the credit rating agency said: “Claims stemming from two named storms and generally poor weather conditions in the UK over the festive period will maintain pressure on non-life insurers’ profitability, AM Best believes.

“While ultimate losses will likely be manageable for the UK’s insurers, persistently high claims inflation, coupled with recent periods of inadequate pricing, will exacerbate the impact on bottom lines.”

Entitled “UK Weather Claims Manageable for Insurers but Add to Pressure on Earnings,” the commentary attributed AM Best’s negative outlook on the non-life insurance segment in part to the volatility in property lines.

“Property lines generate around one-third of UK non-life premium income,” AM Best noted. “Exposure to weather-related risks – and flood risk in particular – can generate material losses and volatility in UK property insurers’ results.

“Significant insured losses would add further pressure to this segment’s profitability.”

Amid robust inflation, the rating agency said, the costs of claims have remained “stubbornly” high. Additionally, underwriters have had difficulty in increasing rates to what AM Best called “more adequate levels” due to the new pricing rules for retail motor and home insurance in the country.

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