UK P&C 2020 outlook stable reflecting resilient capitalisation and strong operating performance

Written by Adam Cadle

26/02/2020

The 2020 outlook for the UK P&C insurance sector is stable, reflecting resilient capitalisation, good operating performance, and the expectation that the sector will be able to manage the pressures from rising claims costs, low for longer interest rates, and regulatory uncertainty.

In Moody’s Investors Service latest report on the sector, it said Solvency II (SII) ratios are set to remain solid, supported by good operating capital generation. “Our cohort’s average SII ratio remained stable at 165% at half-year 2019 supported by solid operating profits, which offset the adverse impact of the Ogden rate change, lower interest rates and dividend payments,” Moody’s stated.

“We expect SII ratios at year-end 2019 and through 2020 to remain broadly consistent with those reported at HY 2019 as many insurers hold capital towards the upper end or above their target range and will continue to manage any further excess accumulated.”

Moody’s said the sector’s overall performance is good but “under pressure”, with underwriting margins “declining” and investment income “falling”. Claims inflation is outpacing price rises, reducing scope for future reserve releases and insurers are relying more on cost cuts as competition and consumer friendly legislation hold back price rises.

Furthermore, insurers are leveraging technology and innovation to sustain margins and win market share.

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