Analysis reveals that companies have more motor cash to boost future profits.

Motor insurers have yet to empty their tank of prior-year reserves, an analysis of FSA returns has found.

The findings mean insurers can continue to prop up their underwriting results in future with the release of money held back from previous years.

Insurers released a record £1bn in reserves to boost performance last year.

The analysis by professional services firm Deloitte found that insurers had released less than 20% of the original reserves from the years 2001 to 2004.

The figures also showed that the reserves released to support the 2007 accident year came largely from the 2002 to 2005 accident years.

James Rakow, an associate partner in Deloitte, said: “There is money left in the tank from the 2004 to 2006 accident years.”

In recent months senior insurance executives and analysts have warned that insurers cannot continue to make large reserve releases across their UK business lines.

Citigroup said in an analysis of the UK general insurance sector: “We see a fairly large part of the reserve cushions concentrated in the hands of a fairly small group of insurers; in other words, the average insurer may have little ability to keep subsidising weak current-year returns with the excess profits generated on hard market business.”

The average reserve release in the motor market last year was 12.4% of net earned premium, according to Deloitte. In 2005, the average was 6.6%.

The largest reserve release of 2007 was made by insurer CIS, which released more than 35% of net earned premiums. Some companies, including AXA and Highway, strengthened their reserves during last year.

The level of reserve release across the market is expected to decline over the next two years. Deloitte predicts an 8% release in 2008, followed by 6% in 2009.

The UK motor market produced a net operating ratio of 102.2% last year, including reserve releases. The pure net operating ratio – excluding reserve releases – was 114.6%.

Deloitte predicts that the market’s underlying underwriting profitability will improve in the coming years. It forecasts that the pure net operating ratio will be less than 111% in 2009.