Pricing pressure is the greatest threat to UK insurers, according to a report by Fitch Ratings.
Increased competition has also added to the pressure on rates, noted the ratings agency.
Chris Waterman, senior director in Fitch's insurance group, said: "There has been brisk competition in the UK non-life market in the last year but also some evidence that insurers are remaining relatively disciplined on rates. This year's stock market volatility and the market's recent experience of under-pricing and under-reserving are so far steering insurers away from the capital-eroding chase for market share."
In its report, Fitch also noted that trends at this precarious phase of the underwriting cycle are encouraging. Technical profitability in 2005 improved and the overall return on equity for UK non-life insurers reached double digits for the first time in over five years. To date in 2006 there has been evidence of these trends continuing, although new and innovative distribution strategies are likely to commoditise certain products further and squeeze down rates.
