Modest improvement for U.K. insurers in 2003

U.K. non-life insurers posted modest underwriting gains in 2003, according to statistics from A.M. Best.Returns filed with the rater indicate an industry combined ratio of 94%, down from 98% for 2002. A.M. Best says, however, that results have probably peaked, with company returns showing on a gross basis that the only major class showing an underwriting profit is property. “This suggests that, unless companies are for more effective than previously in managing business volume through the softening market, aggregate “through the cycle” underwriting profitability will remain elusive,” the report notes. “If so, some insurers will find that maintaining balance between shareholder returns and risk-adjusted capital levels will be challenging. This, in turn, would put pressure on future levels of financial strength, particularly through 2005 and 2006.”The rater predicts a 55% gross loss ratio for the property line in 2003, down from 62% in 2002, while motor should see a loss ratio around 75%, up from 73%, and prices in the line fail to keep pace with loss cost inflation. Liability lines should improve for 2003, with a loss ratio around 69%, 16% better than 2002. A.M. Best defies those commentators who say the liability segment is too heavily reserved.Rates in property and motor lines have already peaked and price competition is being seen in the motor line in particular, the high loss ratio indicates underwriting profitability will not likely be maintained through the cycle. In liability, 2003 rate increases should flow through to 2004 results, but there is little hope of further improvement in the market, A.M. best predicts.