The Bank of England has said claims inflation is an issue affecting every insurer and has written to the chief actuaries of general insurance firms and Lloyd’s managing agents regulated by the PRA.

The letter from Nylesh Shah chief actuary for general insurance, co-head of division, general insurance risk specialists at the Bank of England, states: “We expect claims inflation to affect all general insurance firms, although the nature of the impact will vary depending on the firm’s business model and risk profile.

“There is a risk that persistently elevated claims inflation might result in a material deterioration of solvency coverage for some firms unless they take appropriate mitigating actions.”

It concludes: “We are continuing to monitor and review how firms are preparing for and allowing for claims inflation in their reserves, claims, capital requirements, and underwriting/pricing, in line with our approach document which sets out our assessment of insurers against current and plausible future risks.

“We would encourage all firms to review our findings and consider how each of the points may impact their firm during the mid-year reserving and capital assessment processes and beyond.”

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