Review
The business – Amlin UK
Trading environment
The UK commercial market continued to trade in difficult conditions as illustrated in the above rating table. The rating analysis excludes the impact of claims inflation which has further reduced margins.
The motor account experienced average rate reductions early in the year. However, there have been positive rating signs since the second quarter of 2008. Competition is reducing, illustrated by a drive to increase rates, particularly on renewal business by most competitors. This has led to increased new business opportunities. Distressed business has limited market appeal, with haulage rates showing particular upward pressure. The improvement in motor rates is accelerating over time. This is an important indicator for the wider market as, historically, motor has been an early indicator of trend reversal.
UK property rates remain under pressure with many competitors aggressively attacking new business whilst trying to achieve increases on their renewal rating. Rates reduced by an average of 0.6%. However, we appear to be at the bottom of the pricing cycle in this market segment.
Employers’ liability and public liability saw average rate reductions of 6.3% and 5.3% respectively in the year. However, liability classes are also showing signs of improving conditions with limited rate increases being experienced. New business conversions have picked up, particularly reverse flow business from the major brokers who have commenced moving business from larger competitors to whom we lost business over recent years. We expect to see this trend continue.
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Professional indemnity rates have continued to trend downwards with an annualised reduction of 8.0%. We continue to monitor the situation and manage the account carefully. The financial institution market continues to resist the inevitable shift in mentality towards the writing of this class despite heightened risk in world financial markets. Rates decreased by 9.0% on average in the year. There are some signs of improved rating but overall the market remains extremely challenging. Consequently our account remains small.
In addition, professional indemnity markets have seen an increase in claims from mortgage valuation frauds and claims arising from the financial crisis. Our underwriting strategy has been to reduce exposures to these sections of the market. To date, our known involvement is limited. For example, we are aware of only three insureds who could be exposed to claims arising from the collapse of funds managed by Bernard Madoff. At 31 December 2008, we have reserved prudently, in anticipation of an increased number of claims.
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