Fitch Ratings has maintained a stable outlook on the UK non-life insurance sector, even as fundamental indicators remain weak. The stable outlook indicates that the vast majority of UK non-life insurers' ratings are likely to be affirmed over the next 12-24 months.
"Key UK non-life insurance market indicators, such as investment returns, current-year technical results and levels of reserve surplus, remain weak", said Bjorn Norrman, associate director in Fitch's EMEA insurance rating group.
Fitch expects earnings to remain under pressure for the next 12-24 months, and investment returns are likely to remain depressed. Fitch does not expect an imminent turn in the pricing cycle. Next year should see modest price increases, but competition and the possible entry of naïve capacity, i.e. capacity from relatively inexperienced new providers, could delay higher price increases. A more favourable development is expected over a longer period, as current returns are too low to satisfy shareholders.
Capitalisation in the UK non-life sector remains strong, despite the current challenge of earnings generation, and this is a key factor underpinning the majority of Fitch's ratings.
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