S&P reports positive outlook for UK insurers

by Gill Montia

Story link: S&P reports positive outlook for UK insurers

Standard & Poor’s (S&P) has described the outlook for the UK insurance sector this year as better than in 2007, baring any catastrophic events and consequent major losses.

However, in a recent report, the credit ratings agency refers to the increased risk of recession in the UK.

The agency sees the UK economy as one of the most exposed in Europe to the risk of recession and highlights the effect it could have on an industry that has enjoyed an environment of steady economic growth in recent years.

In addition, S&P expects market conditions to continue to soften, reducing underwriting margins.

With regard to the UK non-life sector, which is the third largest in the world in terms of premiums (£66.5 billion gross written and £51.1 billion net premiums in 2006), S&P sees the market becoming more disciplined and applying greater focus on risk-adjusted returns, allowing underwriting profitability to be maintained.

The report praises the strength of the UK regulatory system, pointing out that the FSA’s risk-based capital regime has encouraged insurers to focus on enterprise risk management, thus maintaining profitability.