Ecclesiastical UK head vows improvement after 105.5% COR

Ecclesiastical UK managing director Steve Wood has vowed to improve his division’s underwriting after it posted a 105.5% combined operating ratio (COR) in 2012.

The 2012 UK COR was 5.8 percentage points worse than the profitable 99.7% it reported in 2011. The UK underwriting loss for 2012 was £12.3m.

The specialist churches and charities insurer’s group pre-tax result was bolstered by a surge in investment returns, but Wood stressed that the company could not expect investment income to offset poor underwriting results in future years.

Speaking to Insurance Times after the release of the results, Wood said: “Clearly there’s a lot of uncertainty in investment markets and we can’t assume [the investment result] is sustainable,” he said. “That’s why we have to drive improvements in our underwriting results. We can’t continue to make underwriting losses – that has to be turned around.”

Like many of its peers in the UK general insurance market, Ecclesiastical’s UK underwriting performance in 2012 was hit by a rise in employer’s liability (EL) claims.

Wood said EL claims had increased significantly over the year. “That’s partly due to the economic environment because in tougher times you tend to see more liability claims,” he said. “It’s also about the structural changes and pressures going on in the care sector, where there have been cutbacks in terms of funding and some operators are looking to save money and are cutting back on risk management and health and safety.”

He admitted that the specialist churches and charities insurer needed to pump money into EL reserves over the year but did not provide a figure.

To improve underwriting, Wood said Ecclesiastical had increased rates in 2012 and would continue to do so in 2013. “We are taking action to increase rates, particularly on liability led business,” he said. “We have been increasing rates on liability business and we’re pushing that on. We’ve also increased our household rates through the year. Commercial property business is more difficult to carry rating increases in, but we have managed to do that selectively.”

He added that exiting from the motor market last year would allow them to focus on their specialist areas and help drive sustainable profit in those niche markets. “It helps us to focus on our specialist lines of business,” Wood said. “We were a very small motor writer and it’s a market where you need scale. It’s also a line of business that’s not particularly connected to our other product lines and it was sensible to exit. We now have an opportunity to develop our business as a specialist in the charity sector, heritage and fine art.”

Wood said that 2013 would be year for improvement and developing existing lines of business that set Ecclesiastical apart from other insurers: “Our main plans are about improving our underwriting results and keeping our focus as a specialist.”