R&SA and others reconsider guest house and hotel cover

Royal & SunAlliance (R&SA) is reducing its exposure to guest house, hotel and rented property insurance.

Small business underwriting manager Paul Shattock said the market had been prone to large fire claims.

He added that many properties have suffered large flood claims because they are located in seaside areas.

"This is not a development area for R&SA and we believe the business will decline of its own accord," said Shattock.

"Part of the problem has been that this segment of the market has been overbroked and this has meant that the business is underpriced and difficult to make a profit on."

Shattock admitted that the move could see R&SA's market share dwindle. "So we are saying, this is the price we want to charge, and we know that customers can get [the product] cheaper elsewhere."

He added that many insurers are no longer wishing to compete in the area. Despite market rumours, Norwich Union has denied it is to pull out of the market.

Hermes Credit and Guarantee has specialised in landlord and hotel cover for 30 years.

Hermes underwriting manager Christopher Wirth said: "This will always be a market for specialist underwriters and will always be a small market in that sense.

"Some insurers enter the market without the experience of writing the business."

An industry analyst predicted that more large insurers would phase out their books of hotel insurance.

"High-risk business is no longer desirable," he said.