LV=’s O’Roarke: commercial showing signs of improvement

There are signs that the troubled UK commercial lines insurance business is improving, according to LV= general insurance managing director John O’Roarke.

However, he adds claims experience could push his company to a full-year commercial loss.

O’Roarke’s comments come as LV= posted a 1% rise in first-half 2012 general insurance profit to £53m (H1 2011: £52m and a 1.1 percentage point improvement in combined ratio to 97% (H1 2011: 98.1%).

“There are very definite signs of improvement,” O’Roarke told Insurance Times following the publication of LV=’s first half results. “We are seeing signs that rates are starting to harden - perhaps not at the level they need to be but there are encouraging signs that people are getting a bit more price-disciplined.”

An Insurance Times investigation revealed that the UK commercial lines business was firmly in loss-making territory in 2011, with six of the most prominent insurers, including LV= posting a collective combined ratio of 109%.

LV=’s own commercial combined ratio was 114.1% in 2011, the study showed.

O’Roarke said the commercial lines business generally needed rate increases of between 15% and 20%, and that while it was a little too early to say, it could expect to achieve hikes of between 8% and 10% this year. “If we can get another 8% to 10% next year we are starting to get towards positive territory,” he said.

LV= itself had targeted to break even in commercial lines this year but that some individual large claims threatened to push the combined ratio above 100% again. He estimated that LV=’s commercial lines combined ratio would finish the year within the year within the 103% to 108% range dependent on claims development.