Insurance sector has proved itself a stabilising factor during the financial crisis, economists say
Overall premium income for UK insurance plummeted by almost one-fifth in 2008 to £215.3bn, according to research released this week by International Financial Services London (IFSL) and endorsed by the ABI, Biba and Lloyd’s.
But general insurance premiums rose 8% to £47.2bn, mainly as a result of increased business coming in from overseas.
The report, ‘Insurance 2009’, predicted the beginnings of recovery in 2010 following a subdued 2009.
It attributed the fall in premiums to a drop in long-term premiums, such as life insurance. As the economy faltered, demand for long-term cover fell, pushing down rates. Long-term premiums fell by nearly one quarter in 2008 to £168.1bn.
Gross premium on the London Market was conservatively estimated at £24.7bn in 2008, up 13% on the previous year. The one-quarter fall in marine P&I clubs premiums during the year was more than offset by an increase in insurance companies’ and Lloyd’s premium income. Lloyd’s generated 63% of London Market premiums, with the company market accounting for a third and P&I clubs the remainder.
IFSL’s senior economist Marko Maslakovic said: “The economic slowdown has shown that the UK insurance sector is sufficiently capitalised. Insurance companies have minor exposure to mortgage-related assets, and losses on insurance coverage have been limited to specialised lines of business. The insurance sector has acted as a stabilising factor at a time of considerable volatility in the broader financial markets."
2008 is the last full year for which premium information is available. Figures for 2009 should be ready next spring, the IFSL said.
The report also revealed that global insurance premiums grew by 3.4% in 2008 to $4.3 trillion (£2.7 trillion). This was driven by growth in emerging countries. The UK was the third-largest insurance market in the world in 2008 and accounted for 10% of global premiums. The USA was the largest market with 29% of global premiums, following Japan with 11%. UK premiums were highest per head in the world, and second highest as a proportion of GDP.