Report predicts that hurricane losses will hold back move into profit
The UK household market will fail to make a profit in 2006 because of the knock-on effects of Hurricane Katrina, Deloitte has forecast.
In its annual survey of the UK home insurance sector, the professional services firm said the market's combined operating ratio (COR) would be 100% - meaning that the market will only break even - in 2006.
But it added that, had it not been for this year's most devastating Atlantic hurricane season on record, the market would have made a profit.
It predicted that, as a result of the hurricanes, global catastrophe reinsurance rates would rise next year.
This, it said, would have a knock-on effect on UK insurers' net written premiums (NWP) and ultimately their net COR.
Gross written premiums were expected to grow by 1.6% in 2006, but net written premiums were only expected to grow by 0.2%. Catastrophe reinsurance premiums were expected to rise by 15%.
In contrast, Deloitte said 2005 was expected to see a 1.5% increase in GWP and a 1.6% rise in NWP. The COR would be 100%, it added.
Motor expected to sink lower
The UK private motor market will fail to make a profit for the eleventh year running, according to a Deloitte report.
The firm said the market's combined operating ratio for 2005 would be 104%, three points worse than 2004's COR of 101%.
It also warned that 2006 would prove to be even more unprofitable with an expected COR of 108% unless rates increased significantly.
Deloitte predicted that rates would increase by 0.7% in 2006, but that this would be insufficient to match claims inflation that was expected to be 5.8%.
Catherine Barton, partner in the insurance practice at Deloitte, said: "We are seeing upward movement [in rates] from some insurers."
But she added that earned premiums were not going up enough to match claims inflation.