General insurance in the UK continued its slow crawl towards recovery last year, making total losses of £2.3bn in 1999, compared to £2.6bn in 1998.

This was one of the key findings of the Association of British Insurers' annual study, the Insurance Statistics Yearbook.

One of the main movers in the sector was motor insurance, which reduced its losses to £1.3bn compared to £1.48bn.

The improvement came from increased net written premiums, which jumped £500,000, while claims costs for the period rose from £6.1bn in 1998 to £6.4bn in 1999.

“The results for general insurance make fairly depressing reading,” said an ABI spokesman. “On the motor side it is not particularly good. We have seen significant premium rises and these statistics show why increases are necessary.”

He said claims costs had soared because of a growing trend for litigation, a higher average cost for claims and increased repair costs.

The ABI's new report shows general insurers have not reported a profit collectively since 1994 (£297m). Globally, general insurance lost a staggering £3.5bn (£4.4bn in 1998) in the last financial year.

Commenting on the results, ABI director general Mary Francis said: “British insurers underpin the UK economy. According to the Office for National Statistics, the British insurance industry adds nearly 2% in terms of value added to our economy.

“There is virtually nothing we do, both as individuals and as businesses, which does not rely on insurance to some extent.”