Fitch commends UK non-life sector

by Gill Montia

Story link: Fitch commends UK non-life sector

Fitch Ratings, the international credit ratings agency, has reported that its outlook on the UK non-life insurance sector remains stable and refers to insurers having remained on the path of underwriting discipline, despite challenging market conditions.

The report commends the non-life sector for having performed above market expectation throughout 2006 and into 2007, achieving strong results despite softening rates and intense competition.

According to Fitch, the performance indicates that: “some of the lessons of previous soft cycles may have been learned”.

However, the agency stresses that it remains imperative for insurers to continue to retain their discipline at all stages of the underwriting cycle.

David Stephenson, Associate Director at Fitch’s Insurance Group, points out that: “The natural catastrophe activity during 2007 has been a sobering reminder of the need to maintain prudence in pricing and reserving. However, we expect that a majority of insurers should be able to demonstrate better results than in previous soft market cycles.”

This he attributes to insurers having demonstrated effective capital management which has brought them to a position of strength at this point of the cycle.

Fitch observes that a soft rating environment persisted into early 2007 but that rate hardening has been observed in some business lines during the year and this should enhance market profitability for the full financial year.

In addition, improvements in risk management and catastrophe modelling should contribute positively to profitability.

Insurers are, however, continuing to experience claims inflation ahead of premium rate increases, across various classes of business.