Insurers and brokers are keeping their heads above the water.
Though the economic outlook for the insurance sector is far from rosy – exemplified by the news last week that Axa and Marsh would be making a total of 1,400 people redundant – there is less pessimism in the sector than in some other industries.
A study of business confidence in the third quarter of this year – conducted by the Institute of Chartered Accountants in England and Wales – revealed that the construction, property, retail, hotel and catering sectors are more downbeat about the future than insurers and brokers.
The study showed that the construction sector – which made 4,000 redundancies in one week last month – is the industry that is most worried about its business prospects. The ICAEW assigned the construction sector a “confidence index” of minus 41.6 (the score is calculated by awarding or deducting points depending on whether a company is “much more” or “much less” confident about its prospects).
While the insurance sector is not exactly brimming with confidence – it was given a confidence score of minus 37.6 – it is still slightly more positive about the future than retailers (minus 38.6) or hoteliers (minus 37.7).
However, that is where the good news ends for insurers and brokers – it is important to note that business confidence in the insurance sector is at its lowest since the ICAEW began conducting its quarterly survey in 2003. In addition, business confidence among insurers and brokers is much lower than the UK industry average (minus 25.7).
Among the sectors that are more confident than the insurance industry about future business prospects are transport, communications, IT, manufacturing and engineering.
However, it may be of some solace to insurers and brokers that, while it is expected that the economy will grow at a slower rate than in recent times, fears of a recession are, as yet, unfounded.
Michael Izza, chief executive of the ICAEW, points out that the outlook is “one of low growth, not contraction”. It is anticipated that the slowdown will be “at its worst” during the latter part of 2008 and early 2009, but economic activity should have started to pick up by the end of next year.
