The motor market is running out of reserves and is still failing to make an underwriting profit, according to exclusive analysis of this year’s FSA returns by acturial consultant EMB.

This year, motor insurers released £880m of reserves to prop up their ailing underwriting results, compared with £1.1bn last year. EMB claims this shows that the reserves are running out – and predicts they are likely to diminish further.

The average combined ratio was 105.5%, a deterioration of 3.4% year-on-year. EMB predicts that the average combined ratio could reach 111% in 2009 – “a level that is clearly unsustainable,” it says.

Meanwhile, underwriting is still failing to turn a profit as rates remain low – particularly in private motor. All the top 20 insurers lost money on their private motor books – and only three of the largest made money on commercial motor.

EMB also highlights the pressure of credit hire costs adding to loss rations, offsetting cutting costs on accidental damage and theft.

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