Robust capital levels and good operating performance has helped the UK property and casualty insurance sector secure a stable outlook from Moody’s Investors Service.
In a report published today, Moody’s notes that the sector has achieved an average operating margin of between 8% and 9% in recent years, while pre-tax profit slightly improved in the first half of 2019.
“UK P&C insurers’ capitalisation remains robust, helping insurers deal with intense competition, rising claims costs and potential technological disruption,” said Helena Kingsley-Tomkins, an assistant vice president at Moody’s.
“Insurers’ operating performance is good for now, and the sector’s profitability remains good, although may deteriorate over the coming year.”
Nonetheless, Moody’s adds that while insurers’ operating performance is good now, pressure is mounting.
Investment income is being suppressed by persistently low interest rates and underwriting margins are being squeezed as high claims inflation in the motor insurance business outpaces price increases.
The industry also faces uncertainty related to regulatory reforms and earnings contributions from reserve releases set to fall, the report adds.
While incumbent insurers are continuing to invest in technology to sustain market positions and profit margins but, the outcome of these initiatives are highly uncertain.
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