Commercial frustration reigns

If Ageas UK’s nine-month results are any indication, commercial profitability for UK general insurers is still a long way off.

Ageas has shown it is no slouch in pursuing profits rather than premiums in recent years. It has managed to shave one percentage point from its commercial combined ratio, yet it is still stubbornly high at 105.4%.

Ageas UK chief executive Barry Smith is not happy with this, and commercial gross written premium growth has slowed to 3.8%, from the 30.8% the company reported in 2011’s nine month results.

Smith blames generally inadequate pricing in the market and says there is capacity that Ageas cannot compete with all the time because of the prices. However, he is reluctant to single any one company out for applying the pressure, stating that commercial competition is evident across the board.

He also says, with an air of resignation, that he could not see any signs of commercial improvement on the horizon.

Ageas’s commercial combined ratio, which is part of an otherwise solid performance, is just the latest sign of strain under which commercial business is putting insurers. We have already seen Lloyd’s insurer Mitsui pull out of commercial motor, RSA exit motor trade business and Ecclesiastical exit fleet business as part of its UK motor withdrawal.

How long before the claims experience in, say, employers’ liability gets too much for someone?

One positive point the market can take from the Ageas commercial combined ratio is that it at least is heading in the right direction. This shows that determination to pursue underwriting profitability gets some results. But it also shows there is only so much companies can do.

The big question is how much more suffering there will need to be before there is industry-wide corrective action.

Inadequate pricing is also a big theme in the solicitors’ professional indemnity (PI) market, following the release of renewals data from the Solicitors Regulation Authority.

The SRA data shows that the total solicitors’ PI premium pool dropped 6.4%, or £16.4m, to £239.3m when policies renewed in October.

In the run-up to the renewals, brokers and insurers expressed concerns about aggressive pricing in solicitors’ PI, and the data seems to bear this out.

The reduction will be highly frustrating to the companies trying to maintain disciplined in a line of business that can produce nasty losses if the price isn’t right.