Motor Insurer Results Even Worse Than Feared in 2009

EPSOM, England, January 14 --

- Companies Urged to Review Strategy as Personal Injury Claims Mount and Reserves Dwindle

Combined operating ratios for the private and commercial motor insurance market in 2009 are set to exceed 115% according to EMB, the international actuarial and business consultancy.

In private motor, combined operating ratios could exceed 120% it says, while commercial motor ratios are likely to exceed 110%.

A sharp increase in bodily injury claims, combined with the reduced reserves available for release, will result in significantly deteriorated reported results for many companies for the year.

Naeem Ali, author of EMB's Annual Motor Report, said: "It has reached a point now where companies operating in these markets have to make a conscious decision for profitability over growth, or face eroding their capital base. The logical conclusion from these figures is that motor premiums need to increase by circa 20%."

While underwriting losses, including expenses, are up by at least 10% on 2008, EMB estimates, the big element affecting 2009 results will be the dwindling amount of reserves. In 2008 reserve releases reduced bottom line losses by nearly 10%. Now, however, the well appears to be drying up and some companies may have to dip into capital.

Significant rises in the frequency and severity of bodily injury claims are major contributors to the deteriorating performance. EMB estimates an increase in excess of 10% in the cost of bodily injury claims per policy for claims under GBP100,000 from 2008 to 2009.

As well as an increased number of claims being reported, insurers are also seeing an increased number of claimants per claim. For larger claims, the growing trend towards periodic payment awards has also fuelled a notable rise in the number of claims exceeding GBP5 million.

Naeem Ali said that based on recent experience across a large number of companies, EMB had revised its estimates for 2009 performance downwards since publication of the last report on 2008 FSA returns in September.

"Even with recent price increases and the improving yields these are slowly starting to deliver, the signs are that the industry will continue in the red in 2010," he noted.

NOTES TO EDITORS

About EMB

Established in 1993, EMB (http://www.emb.com) is a rapidly growing international consultancy firm specialising in non-life insurance. Covering personal lines, commercial insurance and the London Market, its services include Business Consultancy, Actuarial Consultancy, Investment Consultancy, Professional Development, Marketing Sciences, Fraud Prevention and Software. Headquartered in the UK, EMB employs more than 300 people around the globe with clients that include 28 of the top 30 non-life companies in the world.

    
    For more information, please contact Graham Whitehead at EMB:
    Tel: +44(0)1372-751060
    Email: graham.whitehead@emb.com
    Web: http://www.emb.com

For more information, please contact Graham Whitehead at EMB: Tel: +44(0)1372-751060, Email: graham.whitehead@emb.com