A.M. Best Special Report: Non-Life Margins Under Pressure, Despite Rate Increases

OLDWICK, N.J.-(Business Wire)-September 29, 2009 - Last year was the most difficult in recent history for the global economy. What started as a crisis in U.S. subprime mortgages quickly spread through the global banking system and the broader financial system, causing credit markets to close. Governments were forced to take action to support failing banks amid falling equity markets. World economies, including that of the United Kingdom, fell into recession.

In view of the challenging operating environment, the U.K. non-life insurance market performed well in 2008. The absence of large weather-related losses and positive prior-year development led to improved overall underwriting performance compared with 2007. In addition, the cautious investment strategies of the majority of market participants provided some protection against the large declines in equity and bond markets.

In 2009, A.M. Best expects a solid overall performance from the U.K. non-life market, assuming normal weather-related claims experience for the remainder of the year.
Premium rates are rising, although insurers are striving for more substantial increases amid intense competition and a weak economy.
The economic downturn is likely to have a negative impact on loss experience, with an increase in genuine and fraudulent claims.

Reserve releases are expected to support calendar-year performance once again in 2009; however, it is unlikely that substantial releases can be sustained in the medium term.
Low interest rates and volatile equity markets mean insurers can no longer rely on investment earnings to offset weak technical results.

To access a copy of this special report, please visit http://www3.ambest.com/bestweek/bestweekreports.asp?rt=ir.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.

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