Motor insurance giant Highway has been forced to pull the plug on all its new motor business, or risk running foul of the Financial Services Authority (FSA).
The move by Highway comes just a week after Insurance Times revealed that the insurer was “switching off” new motor business from its 30 largest broker clients.
Highway's active underwriter Quin Lovis said massive premium hikes earlier in the year had still not discouraged new customers. This had caused Highway to reach its capacity limit two months before time.
“We have increased premium rates above the market average, which we hoped would reduce growth in case numbers, but this has only had a limited effect,” Lovis said.
“With larger premiums, this has meant that we have reached our limit earlier than expected.”
Last week Lovis said Highway's over-writing of business early in the year was a “lovely problem”.
But this week he apologised to brokers for the difficulty it would cause.
“We will be contacting brokers to explain the situation in detail and we obviously regret any disruption this may cause to their business,” he said.
This year Highway had a net premium capacity of £265m. Next year capacity is set to increase to £325m.
Under FSA rules, insurers have to inform the regulator when they have written more business than expected.
The FSA can then permit insurers to take on extra business if it deems the insurer's financial security and provisions to be sufficient.
The regulator refused to comment on whether or not it had held discussions with Highway.