A return to positive results for 2011 are proof of the underlying strength of UK insurers. But there’s still a way to go

It’s official: UK GI is back in profit.

As the results season gathers pace, the major players are posting CORs in the 90s, and even RBSI, the basket case of 2010, is breaking even.

And this comes against the backdrop of a teetering global economy, the euro crisis and one of the heaviest catastrophe-loss years on record.

What a vindication of the sound basis of the UK general insurance industry, and its relative immunity to the headwinds that batter the more turbulent financial services sectors. The FSA should take note.

It’s also powerful proof that some of the industry’s attempts to solve its collective problems are paying off – for example, the fight against fraud.

But let’s not get carried away. The uptick has been due to motor’s return to profitability – not to pricing for profit in commercial lines. Commercial books are still running in
the hundreds or even early teens. A few years ago, chief executives at results time were keen to talk up their price rises. Now, they are silent on the subject.

It’s a mark of experience triumphing over hope that the market seems to have accepted hardening is not inevitable; the cycle may have ended. To this end, insurers are developing strategies that seek profit in the current climate, rather than gambling on sunny days to come and swallowing losses in the meantime.

This pragmatic approach will make for a less volatile industry (and hence might do some much-needed good to insurers’ share valuations). It will also mean that pressure on costs will remain intense and Chartis’s redundancies, which we reveal this week, are likely to be the first of many this year.

The insurance industry is back in fighting form – but there’s no room for even an inch of fat on the bones.