Outstanding claims from hard market are reducing

UK non-life insurers continued to benefit from reserve releases in 2009 but should not expect this to continue, according to a report by rating agency AM Best. The UK non-life industry has yet to feel the full impact of the global economic downturn on claims frequency and severity, it said.

According to the report, reserve releases have related principally to business written during the hard market conditions of 2003 to 2005. But the agency said outstanding claims for these years are reducing, and the margin built into reserves for business written between 2006 and 2009 is expected to be lower.

AM Best noted that the contribution of prior-year profits to combined ratios was lower overall, suggesting that reserve surpluses have diminished.

It said the drop in reserve releases in the motor sector was partly due to worsening third-party bodily injury claims.