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United Kingdom Insurance Report 2012
Business Monitor International, Nov 2011, Pages: 68
Business Monitor International's United Kingdom Insurance Report provides industry professionals and strategists, corporate analysts, insurance associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on United Kingdom's insurance industry.
2011 will forever be seen as a challenging year for the UK’s insurance sector. Collectively, underwriters of risks through Lloyd’s – and the other major (re)insurance companies that provide property cover – face massive claims arising from catastrophes such as the earthquake(s) in Christchurch, New Zealand, the earthquake/tsunami/nuclear disaster in Japan’s Tohoku region, flooding in Brisbane, Australia and weather-related disasters elsewhere.
In many non-life lines, pricing pressures have been downwards and profits falling or non-existent. Virtually all lines within both the non-life and the life segments are mature and/or highly competitive. The requirements of the European Union’s Solvency II directive, as well as other legal and regulatory changes, are adding to costs and uncertainty. Fairly or not, the UK insurance sector appears to be suffering reputational problems. Finally, a majority of senior executives within the industry would not place the UK in their top three preferred domiciles, given the overall tax system and business environment.
Nevertheless, a clear theme that runs through the latest financial reports published by the top six players in the UK’s life sector (ie typically in July-September 2011 in relation to Q211 and H111) is that these companies have enormous strengths. If their businesses have been contracting, it has generally been because of deliberate decisions made in the context of a coherent strategy to pursue profitability or balance sheet strength ahead of growth.
In many cases, the companies are benefiting from growth in nonlife insurance and/or foreign businesses. Without exception, they are (or shortly will be) ready to meet the requirements of Solvency II and will be able to bear any increase in costs arising from regulatory changes.
As of late October 2011, it appears that the various protagonists at Lloyd’s and the major property (re)insurance companies have the underwriting discipline and the financial strength to withstand the wave of claims resulting from the major catastrophes.
Encouragingly, there are early signs that prices are rising in the global market for catastrophe reinsurance. If there is a major risk for the non-life insurers (and also the life insurance companies – if to a lesser extent) it is harder to earn significant investment profits that are required to cover underwriting losses in an environment of very low interest rates.
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