LONDON--(BUSINESS WIRE)--AM Best states that market conditions for U.K. non-life insurers have been difficult in 2019. Against a backdrop of strong competition, companies have had to contend with changes in the discount rate used to calculate lump-sum personal injury compensation, claims inflation due to higher repair costs and challenging investment market conditions driven by political and economic uncertainty. On a positive note, motor insurers have broadly welcomed the changes to the U.K.’s personal injury compensation system set out in the Civil Liability Act, with key measures expected to come into force during 2020.
In a new Best’s Market Segment Report, “UK Non-Life Insurers Face Strong Competition and Claims Inflation,” AM Best notes that while the uncertainty associated with Brexit continues to weigh on the U.K. economy, from an operational point of view, AM Best-rated U.K.-domiciled insurers are generally well-prepared, and those that plan to continue to underwrite European Economic Area business have put in place arrangements to ensure that they are able to do so following a loss of passporting rights. AM Best also points out that for the retail non-life sector, a loss of passporting rights is not a significant issue as most insurers underwrite principally domestic business.
The report also notes that competition in the U.K. non-life market was intense in 2019, putting underwriting earnings under pressure. Catherine Thomas, senior director, analytics, said: “Premium rates in the property sector remain depressed in spite of rising claims costs. Meanwhile, rate increases achieved for motor business have proved unsustainable as insurers anticipate the cost benefits of measures outlined in the Civil Liability Act. Planned changes to the personal injury compensation system should be positive for claims experience. However, AM Best notes that reforms are still to be implemented and there is considerable uncertainty as to what impact they will have on the frequency and severity of bodily injury claims.”
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