RSA backs off from regional mid-market

Fierce competition for regional mid-market business is prompting a lack of underwriting discipline and causing some players to withdraw, according to RSA UK chief executive Adrian Brown.

RSA revealed in its annual results that it had pulled back capacity from mid-market commercial business because of heavy competition, resulting in a 10% reduction in premium income from this line to £291m for 2011.

Brown said: “We just can’t get the prices and the rates we think we need to make money in that area and that is why we have been reducing volume.”

Brown said there was a core of “two or three” established insurers in mid-market commercial business that consistently charged the correct technical price for the business.

RSA UK’s operating profit was £310m in 2011, up from £149m in 2010. The group posted a £427m post-tax profit, up from £355m. The combined ratios were 98.2% for the UK and 94.9% for the group.

A number of insurers that have traditionally focused on international business written in the London market have turned their attention to the UK regions. These include Aspen Insurance, Liberty and Catlin. Under previous chief executive Dane Douetil, Brit also made a push for the regions.

AXA is raising its game in the mid-market, opening offices in Bristol and Newcastle. AXA Commercial managing director of intermediary Matthew Reed said: “If you want to trade, you have to be there in the regions.”

Others have refused to enter because of heavy competition. Hiscox, for example, sticks to the lower end of the commercial mid-market, considering its cut-off point to be businesses with 150 people or more.

“We are not in the mid-to-large market at all because we don’t want to go head to head with RSA, Aviva, Allianz or AXA,” Hiscox chief executive Bronek Masojada said. “Those are all important accounts to those players and I always think they do it too cheap.”