The margins achievable for underwriters in the London insurance market may come under pressure through 2014 because of increased competition from insurers and reinsurers seeking to diversify their portfolios, among other factors, according to a report by Fitch Ratings Ltd. in London.
Fitch said that while underwriting margins likely will remain adequate for many classes of business written in the London market, margins for some classes, including excess and surplus lines, are “expected to come under pressure,” largely because of increased competition from insurers seeking to diversify away from less profitable classes.
In its “U.K. Non-Life: London Market Comment,” published Tuesday, Fitch said that most of the London market's specialist business lines continued to yield “good technical results in 2013,” with the five-year average calendar year combined ratios for all classes at less than 100%, with the exception of auto business.
The rating agency said that for 2013, the average combined ratio for insurers in the London market was about 85%.
Rates for loss-free reinsurance business fell by as much as 20% at the Jan. 1 renewal, Fitch said, and “increased competition among traditional and non-traditional reinsurance writers will sustain pressure on peak-zone catastrophe reinsurance business” in 2014.
While rates for U.K. automobile fleet business and some casualty lines increased at recent renewals, rates for aviation, marine and energy continue to soften in many cases, the report noted.
The report is available here.