Combination of pressures creating gloomy outlook warns AM Best

Ratings agency AM Best is maintaining a negative market segment outlook on the UK non-life insurance sector, citing economic uncertainty as a key headwind for non-life insurers.

The agency’s report stated that COVID-19-related lockdown measures coincided with the country’s preparation to leave the European single market, and together contributed to the biggest economic contraction since records began, adding that this is expected to maintain pressure on premium income. Strong competition and claims inflation also are likely to dent technical results in the motor line of business, which accounts for approximately a third of UK non-life premiums.

The new report, entitled Market Segment Outlook: U.K. Non-Life Insurance, also cites increased regulatory scrutiny of pricing practices for home and personal motor insurance and ongoing exposure to weather-related events as factors weighing on the outlook.

However, more positively, the report suggests that the planned implementation in May 2021 of whiplash reforms contained in the Civil Liability Act 2018 should have a positive impact on claims costs. The exclusion of communicable diseases (including COVID-19), from business interruption policy extensions written since the outbreak of the pandemic is another moderating factor.

William Keen-Tomlinson, AM Best senior financial analyst and report author, said: “The underlying technical performance of the UK non-life market remains relatively weak, characterised by significant competition, particularly pronounced on the retail side.”

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