Fitch: UK non-life sector remains stable

Fitch's ratings outlook for the UK non-life sector remain stable having been revised from negative in March.

A report, published by the ratings agency today, discussed key challenges for the UK non-life sector over the next 12 to 18 months.

Martyn Street, associate director in Fitch's insurance division said: "While the sector has demonstrated a good level of financial resilience through the height of the financial crisis, insurers are currently faced with the challenge of maintaining profitable earnings through a period of historically low investment returns, at a time when pricing for many insurance lines remains close to a cyclical low"

Fitch forecasts that the combined ratio for the UK non-life sector will peak at around 101% at end-2010, following a 2009 actual of 99.2%. The combined ratios are expected to improve in 2011.

The report also discussed key issues concerning insurers at the sub-sector level, including the recent deterioration in underwriting performance in the flagging UK personal motor market.

There is now evidence that insurers are achieving significant increases in premium rates for this line of business but Fitch forecasts that the effects of improved pricing will take a number of months to filter through to individual company results.

The agency forecasts that the combined ratio for the UK personal motor market will be 123% at end-2010, up from the 2009 actual of 122.3%. These too are expected to improve in 2011.

Market conditions in the London Market have proved more challenging in 2010 than in 2009 and Fitch anticipates that this will be reflected in the results of individual insurers at the end of 2010.

Chris Waterman, managing director in Fitch’s Insurance division said: "The strong results achieved by the London Market in 2009 were helped by a low level of catastrophe events, recovery in investment markets and modest levels of premium rate increases. The agency does not expect that these factors will be as supportive in 2010."