A survey has revealed that insurance companies have weathered theUS home loans storm
General insurance companies claim to have weathered the credit storm better than others in the financial sector, according to a survey by the Confederation of British Industry (CBI) and PricewaterhouseCoopers (PwC).
Unveiling the results of the quarterly financial services survey this week, the CBI’s chief economist Ian McCafferty also said a recession in the UK was unlikely – but admitted the financial services sector was in a crisis.
General insurers were slighly less optimistic about the business situation in the UK compared to the last quarter, but still well ahead of the average across all financial sectors, the survey found.
It was estimated that up to 11,000 jobs could be lost in the financial services sector as profitability and business volumes fall as a result of the credit crisis, but insurance companies surveyed believed they were well insulated.
Andrew Kail, head of insurance at PwC, said personal lines insurers were more optimistic than their commercial lines counterparts.
He added: “Personal lines insurers should have the ability to raise rates in both property and motor, but commercial lines insurers saw record profits last year, so will not be able to raise prices.”
PwC expects commercial rates to fall by 10% or more this year.
Cost cutting and headcount reduction were becoming priorities as the credit crisis continued, the survey found.
Also released this week was a survey by accountant Mazars, which found that 78% of Lloyd’s brokers expected continued rate softening over the next 12 months.
Eighteen per cent thought rates would remain the same and none believed they would harden.
Even so, Mark Grice, head of broking at Mazars, said: “I think that most people are underestimating the effects of the credit crunch.”