Insurer’s motor book has grown 6% to £28.9m in first quarter of 2008.

Lloyd’s insurer Chaucer hailed the recovery of UK motor rates as its motor insurance book grew by over 6% in the first quarter of the year.

Chaucer’s motor book grew to £28.9m in the first three months of 2008, compared to £27.1m in the first quarter last year, according to an interim management statement released this week.

The insurer said the performance of its motor book justified its decision to allocate extra underwriting capacity to that part of the business. Chaucer launched two motor products last year in anticipation of its focus on the sector in 2008.

It is predicting motor rates will increase by 7.5% this year, with the private car market leading the way. But the insurer warned that intense competition in the fleet and commercial vehicle market would hold back recovery of rates in this sector until the second half of the year.

The performance of Chaucer’s motor book is encouraging, given the challenging conditions in the sector. Earlier this month, Highway Insurance blamed the competitive UK motor insurance market and difficult trading conditions for its slow start to 2008. Motor giant Admiral also said rates had moved little in the first quarter of the year.

Overall, Chaucer reported a slight downturn in its divisional underwriting portfolio as market conditions deteriorated. Gross written premiums fell to £169m compared to £176.7m in the first quarter of 2007, as its property and specialist lines divisions saw weakening prices in the face of competition.

Chief executive Ewen Gilmour said: “With significant business still on risk and the hurricane season approaching, it is too early to predict the outcome for the full year, but we are satisfied with the start to 2008. This includes investments where, after a difficult first quarter, performance has now improved.

“Writing for profit not for premium and managing capital efficiently has seen us taking advantage of improving conditions in the UK motor market, while becoming increasingly selective in our international portfolio, where rates are under pressure as the hard market softens. We expect this pattern to continue through the year”