UK:Non-life insurers face dim prospects amidst pandemic-induced economic slowdown

By Ranamita Chakraborty

The outlook for the UK non-life insurance market at negative according to AM Best, due to factors such as an expectation of lower premium volumes due to the economic slowdown driven by the coronavirus pandemic as well as persistent pressure on underwriting performance from strong competition and claims inflation.

A negative market segment outlook indicates that the agency expects market trends to have a negative influence on companies operating in the market over the next 12 months. However, this does not mean that the outlook for all UK non-life insurance companies will be negative.

The majority of business underwritten by UK non-life insurers falls within three classes; motor, liability and property. To date, the UK non-life market has been able to withstand the impact of operating challenges including strong competition and economic uncertainty.

In its market segment report, AM Best notes that the impact on earnings of reduced demand for insurance in the UK, particularly from the SME, hospitality and aviation sectors, is likely to be partly offset by lower claims activity in the motor sector as there are fewer cars on the road.

In the agency’s view, claims experience directly related to COVID-19 will be manageable for diversified companies but the results of companies with a focus on affected lines of business such as travel and event cancellation could see material losses.

In the future, factors that may lead to AM Best revising its UK non-life outlook to stable from negative include evidence of a sustainable improvement in underwriting performance – supported by better technical pricing and the positive impact of legislative reforms as well as reduced economic uncertainty.

Asia Insurance Review

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