Insurer makes £33m third-quarter operating loss following bodily injury losses
RBS Insurance has boosted bodily injury claims reserves by a further £100m in the third quarter, having already pumped £320m into the reserves in the second quarter.
The fresh reserving largely relates to periodic payment orders, where injured parties are paid over time rather than receiving a lump sum, and follows an industry-wide review during the quarter.
In response, RBSI has increased motor prices further from the second quarter. The company added that “significant progress” continues to be made in removing higher-risk business from the motor book through targeted rating actions. It is unclear yet where the reserves have been pumped in, but both Direct Line and NIG have both been badly hit by bodily injury claims this year.
RBS Insurance made an operating loss of £33m for the third quarter of 2010, compared with a £13m profit for the same quarter last year. This brought the operating loss for the first nine months of 2010 to £286m, compared with a profit of £236m for the same period lat year.
However, the third-quarter loss at RBSI was narrower than the £203m loss it made in the second quarter of 2010, which the company attributed to the lower level of reserve strengthening required.
RBSI’s third-quarter combined ratio, including direct costs, was 110.2% compared with 104.7% in the third quarter of 2009. This was because of the impact of reserve strengthening, partially offset by expense ratio improvement.
Excluding increased bodily injury reserving relating to prior years, the combined operating ratio was 100.2%