UK Commercial General Insurance 2009

Published by	Datamonitor
Published	November, 2009	Product code	103417
Content info	79 pages
Price	US $ 4495 PDF by E-mail (Single User License) US $ 11238 PDF by E-mail (Global Site License)

Introduction
Related Reports

UK Commercial General Insurance 2009 published by Datamonitor in November, 2009. This report consists of 79 pages and the price starts from US $ 4495.

Introduction

Abstract

Introduction

This unique report provides an unrivalled analysis of the UK general insurance market with a specific focus on the commercial lines sector. It segments the market by line of business and assesses underwriting profits and investment income. The research also includes an in-depth analysis of the distribution and competitive landscape and forecasts the commercial lines market size to 2013.

Scope of this research

Data on the size, structure and profitability of the total non-life market and the commercial lines sector.
Analysis of the total premiums and market share for the largest commercial lines insurance groups.
A discussion of the main factors affecting the general insurance market in the future along with forecasts of market size to 2013.

Research and analysis highlights

Perhaps the most striking feature of the market, based on our analysis of the 2008 FSA Returns, is the sharp deterioration in the combined ratio in commercial lines. Pure year combined ratios increased across the board in recent years including commercial property, motor, liability and commercial pecuniary loss lines.

One of the main developments that Datamonitor expects to see in the 2009 FSA Returns, when they become available next year, is a significant re-shaping of the commercial books of some of the leading commercial insurance groups. The H1 2009 results point to several large insurance groups reducing their capacity for commercial lines business.

Key reasons to purchase this research

Understand the segmentation of the UK general insurance market and the differing profitability by class of business.
Benchmark your premium income against that of your competitors and understand the drivers of growth in their businesses.
Gain insight into the future development of the market in terms of competitors, major issues and market size.

OVERVIEW

Catalyst
Summary

EXECUTIVE SUMMARY

Commercial lines is running a high pure year COR
- The industry trading result held up well
- Commercial is running a high pure year COR
- 2009 will see a dip in the industry trading result and some changes to groups' commercial books
- The rate of market growth will increase over the next five years as the market hardens

MARKET CONTEXT

Introduction
Conditions are deteriorating for insurers
- The market contracted in 2008 as insurers continued to compete hard
- Insurers pulled capacity from suretyship insurance
- Motor and property insurance continue to dominate the UK non-life insurance market
- Lloyd' s of London underwrites around £2 billion of UK insurance
- Motor, liability, property and pecuniary loss have driven the COR up in recent years
- Pecuniary loss is a strong source of underwriting profit

Insurers are being hit by falling investment income
- A drop in investment income put additional pressure on insurers' margins in 2008
- Insurers saw an estimated trading result of 9% of NWP in 2008

Reserve releases are propping up reported profits
- Insurers propped up their reported underwriting results with around £1 billion in reserve releases
- Insurers made significant reserve releases in motor and property insurance while strengthening reserves for liability insurance

The soft market has hit home in commercial lines
- Growth in commercial lines remains subdued by strong competition
- The commercial market is growing slowly
- Commercial lines is running a high COR, net of reserve releases
- ABI data show a commercial lines profit, after allowing for reserve releases

DISTRIBUTION

Introduction
- National brokers increased their share of the commercial insurance market in 2008
- National brokers saw a significant increase in market share as other brokers saw their market share contract
- The direct channel experienced a small decline in market share in 2008
- Partnerships with affinities have only generated a small proportion of commercial insurance GWP
- Commercial insurance GWP distributed through banks and building societies remains negligible

Less traditional forms of arrangement are more common among smaller SMEs
- Brokers dominate among all sizes of SMEs, though they have greater market share among larger SMEs
- Face-to-face arrangement is popular in the market but is more prevalent among larger SMEs

Price is the key factor behind SME insurance purchasing decisions
- SMEs are sensitive to price, regardless of their size
- SMEs that purchase online appear to be the most price sensitive

High levels of retention go along with high levels of satisfaction
- SMEs are generally happy with their insurance provider
- SMEs tend to prefer longstanding relationships with their providers, making an initial pitch critical

A large proportion of SMEs are unlikely to switch to a new provider
- More SMEs considered a change of provider in 2009 than in 2008
- A variety of companies, from different industries, believe they will change their provider over the next year
- SMEs that use the internet to arrange their insurance are the most likely to search out a new provider
- Of those SMEs willing to buy insurance online or via the telephone, liability products were the most popular

COMPETITIVE DYNAMICS

Introduction
Aviva remains the market leader
- Aviva remained the clear leader in the UK commercial insurance market in 2008 with a 13.1% market share

RSA, Zurich, AXA and Allianz occupy positions two to five
- RSA has adopted a strategy of selective capacity withdrawal and premium rate increases
- Zurich remained the third largest UK commercial insurer in 2008 with a market share of 9.8%
- AXA remained one of the larger top 10 commercial players in 2008, with a market share of 6.9%
- Allianz maintained its market share of 7.1% in 2008
- AIG was the 6th largest commercial insurance group

NFU Mutual and QBE gained share
- NFU bucked the trend, reporting a 3.3% increase in its commercial lines business GWP in 2008
- QBE grew its commercial lines business by 8.5% to £416.1m
- RBS' s 2.8% market share was largely due to its sizable presence in the commercial property insurance market
- ACE' s 2.4% market share made it the tenth largest commercial insurer in the UK market

FUTURE DECODED

Introduction
The industry trading result will be challenging in 2009
- The 2009 results will show some significant re-shaping of players' books
- Profits are expected to dip in 2009
- Investment returns will fall
- Reserve releases are expected to continue in 2009
- Profits are likely to be impacted by a sharp rise in the pecuniary loss COR in 2009 and 2010

Commercial lines is forecast to grow to £18 billion by 2013
- Adverse economic conditions will trim growth across the market early in the forecast
- The liability insurance market will see growth close to the market compound average
- Premium rate inflation will drive growth in the commercial motor insurance market
- Commercial property insurance GWP will experience the fastest growth of all commercial insurance lines
- Economic recovery and premium rate growth will increase commercial pecuniary loss GWP
- An improvement in the economy and premium rates will result in higher liability insurance premium income
- The liability market will reach a value of £7.6 billion in 2013 under expected conditions
- Growth in commercial motor insurance GWP will mainly come from higher premium rates
- The UK commercial motor insurance market is forecast to reach a value of £3.8 billion in 2013
- Commercial property premium income growth will be stronger in the early years of the forecast
- The commercial property market is predicted to be worth £5.9 billion by 2013
- Commercial pecuniary loss GWP is expected to grow, but not regain recent highs

APPENDIX

Definitions
- (Untitled sub-section)

Additional data
Further reading
Ask the analyst
Datamonitor consulting
Disclaimer

TABLES

Table: Annual growth in general insurance market, 2000 - 08 (%)
Table: GWP by line of business, 2000 - 08 (£m)
Table: UK insurance market split by ABI members and Lloyd' s of London, 2008 (£m)
Table: Total market combined ratio, 2004 - 08 (%)
Table: Accident year CORs by line of business, 2004 - 08 (%)
Table: Underwriting result by line of business, 1998 - 2008 (£m)
Table: Underwriting result, investment income and trading result as a percentage of NWP (worldwide business of UK insurers), 2000 - 08
Table: Underwriting result, investment income and trading result as a percentage of NWP (UK business), 2000 - 08
Table: Commercial insurance GWP by line of business, 2005 - 08 (£m)
Table: Accident year COR, commercial lines, 2005 - 08 (%)
Table: Underwriting result, commercial lines, 1998 - 2008 (£m)
Table: Market share of the distribution channels in the commercial general market, 1999 - 2008 (%)
Table: Q: "What were the most important reasons for choosing your commercial insurance provider?"
Table: Q: "How long have you been with your current insurance provider?"
Table: Q: "Do you think you will change your commercial insurance provider in the next 12 months?"
Table: Top 10 UK commercial general insurance groups by market share and GWP, 2005 - 08
Table: Forecast commercial general insurance GWP, 1997 - 2013f
Table: Key variables affecting commercial liability insurance GWP, 2009f - 13f
Table: Forecast of UK commercial liability insurance GWP, 2005 - 13f (£m)
Table: Key variables affecting commercial motor insurance GWP, 2009f - 13f
Table: Forecast of UK commercial motor insurance GWP, 2009 - 13f (£m)
Table: Key variables affecting GWP, 2009f - 13f
Table: Forecast of UK commercial property insurance premium income, 2005 - 13f (£m)
Table: Forecast of UK commercial pecuniary loss insurance premium income, 2005 - 13f (£m)
Table: Total UK pecuniary loss underwriting account, 1998 - 2008
Table: Total UK property underwriting account, 1998 - 2008
Table: Total UK household underwriting account, 1998 - 2008
Table: Total UK commercial property underwriting account, 1998 - 2008
Table: Total UK motor underwriting account, 1998 - 2008
Table: Total UK personal motor underwriting account, 1998 - 2008
Table: UK commercial motor underwriting account, 1998 - 2008
Table: UK liability underwriting account, 1998 - 2008
Table: UK accident & health underwriting account, 1998 - 2008

FIGURES

Figure: The industry has experienced slow or negative growth in recent years due to strong competition
Figure: Increases in the liability and property sectors were offset by falls in motor, A&H and pecuniary loss
Figure: Motor and property continue to be the two largest lines of business
Figure: Lloyd' s of London underwrites around 5% of the UK insurance market
Figure: The combined ratio for the total market bottomed out in the years 2004 - 06 but it has increased to 108% in 2008
Figure: Motor, liability, property and pecuniary loss have seen increasing CORs
Figure: Pecuniary loss and A&H are a steady source of profits
Figure: Investment income as a percentage of premiums fell to an all time low in 2008 due to the financial crisis
Figure: The trading result for UK business fell in 2008 however it was broadly in line with the across-the-cycle trading result
Figure: Insurers have bolstered reported profits with massive reserve releases in the years 2005 - 08
Figure: Insurers made significant reserve releases in motor and property insurance while strengthening reserves for liability
Figure: Slow premium growth has led to deterioration in the commercial lines COR
Figure: General liability is the largest line of commercial insurance
Figure: Commercial lines combined ratios have increased across the board
Figure: Commercial lines underwriting peaked in 2004 - 6 and has now started deteriorating
Figure: National brokers witnessed a significant increase of their share in the UK commercial insurance market in 2008
Figure: Brokers have the highest penetration among medium-sized firms
Figure: Micro SMEs are most comfortable with arranging their cover over the telephone
Figure: Price was almost matched in importance by service as a criteria for selecting a provider
Figure: Internet clients are the most price-sensitive
Figure: Satisfaction levels in the market remain high
Figure: Very few SMEs have changed their provider in the last two years
Figure: Companies in the education sector are the most likely to seek out a new quote in the next 12 months
Figure: Clients which arrange their insurance through the internet are the most likely to search for another provider
Figure: SMEs show the greatest willingness to purchase public and employers' liability insurance online
Figure: QBE and NFU Mutual increased market share in 2008
Figure: Insurers are likely to see a sharp rise in the pecuniary loss COR judging from the effects of the last recession in 1990
Figure: Commercial insurance GWP is forecast to grow throughout the forecast period as the market hardens
Figure: Liability GWP is expected to fall in 2009 and return to growth thereafter
Figure: Premium rates are expected to drive commercial motor insurance growth in 2009 and 2010
Figure: Commercial property is set to harden in order to bring the COR down
Figure: The commercial pecuniary loss market is forecast to grow again, though at a lower rate