RSA restructures loss-making commercial motor contract

RSA has restructured its loss-making contract with car lease firm Motability Operations, the insurer’s largest commercial motor client.

Under the terms of the new five-year contract, which takes effect on 1 October, RSA will enter a quota-share arrangement with Motability’s captive insurer. RSA will retain 20% of the premium and the risk associated with insuring Motability and cede the remainder to the captive.

RSA will continue to offer multi-year policies under the new contract, but all policies underwritten under the new contract will be repriced every six months.

Policies written under the current contract will remain in force for the duration of their three-year contract.

RSA revealed in its 2012 results that most of the losses from its commercial motor book in that year emanated from the Motability contract.

The insurer’s commercial motor underwriting loss in 2012 deepened to £44m from £37m in 2011.

The company said at the time: “We are working on the details of new arrangements for this contract, to be effective from October, however, commercial motor will continue to be negatively affected by the contract’s old tranches for the next few years.”

RSA commercial managing director Jon Hancock said of the renewed contract: “We are proud to work in a partnership with Motability Operations and share its goal of providing trouble-free motoring to all customers. Motability Operations is our largest commercial motor insurance partner and the largest fleet operator in the UK, and we look forward to continuing to deliver a first class service together.”