Tom Broughton reviews the effects of the credit squeeze
As we pass the first quarter of the year the market’s confidence continues to demonstrate its resilience to the global economic uncertainty. While the financial crisis in the banking sector dominates the headlines, general insurance continues to remain insulated from the turmoil in its first end-of-term report. Findings from a PricewaterhouseCoopers/CBI report this week reveal that insurers are largely unconcerned about their ability to raise capital despite the predictable impact and worry of funding costs. The bottom line is that any pain is made easier as the majority of UK insurers appear to have little or no exposure to the credit squeeze. And what’s more, the survey points out that any predicted portfolio valuation worries have not come to fruition at all. On the ground, PwC anticipates that rates in the commercial market may continue to bottom out and fall by up to 10% this year, while personal lines continue to grow and insurers continue to position their businesses for growth. However PwC points out that it is widely anticipated that the recent high valuations placed on broker businesses will decline as credit funding is squeezed. And it is not to say that individual companies will not be looking to swing the axe and cut costs by making wholesale redundancies, especially if they operate in a global marketplace. But put the state of individual companies to one side and the market’s current health is in relative good shape, with only pricing continuing to be the major headache.
The news that the Ministry of Justice has missed its own deadline to release its consultation on the reform to the personal injury compensation process is depressing, but hardly a surprise. Usually, bad policy is born out of purely political motives and, in this instance, union influence may have extended above and beyond Bridget Prentice, the minister in charge. One option may be to exempt industrial injury claims from the reforms, but this may serve only to highlight the union/lawyer cash cow at the heart of this issue and probably serve up an open goal to the circling Tories. I hope to be wrong, but I imagine we are going to be left with not much more than the status quo. IT