UK non-life market outlook negative

Written by Adam Cadle

27/11/2019

The sector for the UK non-life insurance company market in 2020 is negative, reflecting high claims inflation and a weak pricing environment for home and motor insurance, Fitch Ratings has said.

“We expect these factors to lead to a decline in insurers' underwriting profitability. Regulatory measures to reform pricing practices could also weaken profitability and put significant strain on insurers' business models,” the ratings agency said.

In contrast to the UK non-life company market, the London market, which is centred on Lloyd's of London and tends to underwrite large complex international risks for corporate customers, has a stable sector outlook for 2020.

The stable outlook reflects our view that the challenges of rising claim costs and low investment yields will be counterbalanced by improved underwriting and pricing discipline. This follows a market-wide profitability review initiated by Lloyd's in H118 and now incorporated into the market's annual planning process.

Despite the challenging market conditions, our rating outlook for both the UK non-life company market and London market is stable, indicating that we expect the majority of ratings to be unchanged over the next two years. This reflects the resilience of rated insurers' credit profiles given their strong capitalisation and well-diversified business profiles.

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