Insurer's not as bullish, but optimism continues

General insurers continue to feel optimistic, but are not as bullish as they were in the last quarter, according to a survey by the CBI and PwC. Bullishness has deteriorated because premiums did not live up to last quarter’s confident forecasts where more than 60% of respondents had predicted premium growth. However, respondents predict a stronger premium income for the coming months.

“This more tentative optimism reflects the fact that whilst some insurers are reporting rising premium rates they are not hardening as fast as has been hoped and others are not seeing any increase in rates,” said the report.

Andrew Kail, UK insurance leader for PwC added: “Despite cost reduction measures, some insurers now expect profitability to fall as the cost of claims will probably increase as the impact of the recession bites."

For brokers profitability grew this quarter, but at a much slower pace than in March’s survey said the survey. But the increase in profitability is expected to gather pace over the next quarter. Numbers employed fell at their slowest rate over the five quarters of decline.

Recruitment plans have also reversed for the general insurance industry, bringing the insurance sector in line with other areas of financial services which continue to shed jobs. About 34,000 jobs were lost in the financial services last year, while 17,000 were lost in Q1 and 15,000 in Q2 of this year.

Overall though optimism in the financial services sector has returned for the first time in two years. The increase in confidence came despite business income, profitability fall during the three months to June. Optimism came from profitability and business rates declining at a slower rate. But the report warned that this does not necessarily signal a recovery or a return to pre-crisis confidence levels.