Nov 27 - In Standard & Poor's Ratings Services' view, the U.K. non-life
insurance industry is facing a number of significant regulatory developments at
a vulnerable time (see "Legal And Regulatory Changes: A Help Or A Hindrance To
The U.K. Non-Life Insurance Market?"). A new agreement is needed to determine
the basis on which flood cover is provided beyond June 2013; legal changes in
April 2013 will seek to counter rampant claims inflation in motor bodily injury
lines; referral fees are to be outlawed; and the Competition Commission has set
up an enquiry into the motor insurance sector. The changes are potentially
positive for insurers, but significant uncertainties remain.
Meanwhile, the increasing use of comparison Web sites to purchase retail lines
is squeezing profit margins, the market is increasingly commoditized, and
investment returns are likely to remain low. Because the U.K. non-life market
is developed and mature, we expect future growth to be relatively slow. Two
trends have supported results in recent years; reserve releases and tariff
increases. However, these trends appear to be coming to an end. On top of
relatively unfavorable industry fundamentals, this could make 2012-2013
difficult for players in the non-life market.
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