Uk Commercial Property Insurance 2007

Content

• Chapter 1 Executive Summary
  • The commercial property market suffered in 2006, continuing the trend from 2005
  • Commercial property GWP declined to 4.9 billion in 2006
  • The commercial property underwriting result fell by 38.6 per cent in 2005
  • Commercial property claims fell in 2006 as costs resulting from fire, business interruption and weather damage all declined
  • The industry remains concerned about future losses related to fire and flood as recent changes have heightened uncertainty in both
  • Commercial insurance is largely distributed through intermediaries, however, there are signs of growth in other channels
  • Brokers still dominate the distribution of commercial lines insurance
  • Direct insurers hold a relatively small share of the commercial market
  • Banks and building societies remain small players in the commercial insurance market
  • In 2005, nine of the top 10 commercial property insurers increased market share, as the market became more consolidated
  • Most top 10 commercial property insurers increased market share in 2005
  • The top 10 commercial property insurers experienced mixed results with their ratios in 2005, with St. Paul experiencing the lowest combined ratio
  • Premium rates fell in the SME sector while a number of new underwriting agencies are targeting this marke
  • Broker networks and consolidation among brokers continued to proliferate, while large insurers have bought into the distribution chain
  • The commercial property insurance market experiences strong price competition, and moves into an underwriting loss in 2007
  • Datamonitor forecasts that the commercial property insurance market will reach 5.5 billion in GWP by 2011
• Chapter 2 Introduction
  • What is this report about?
  • Who is the target reader?
  • How to use this report
• Chapter 3 Market Context
  • Introduction
  • The commercial property market suffered in 2006, continuing the trend from 2005
  • Premium income fell by 6.9 per cent in 2006
  • The commercial property underwriting result fell by 38.6 per cent in 2005
  • Commercial property insurance performance ratios deteriorated in 2005
  • The claims ratio increased after a long run of improvements
  • The expense ratio increased by 4.1 percentage points in 2005
  • The underwriting ratio also deteriorated in 2005 as both the claims and expense ratios increased
  • Commercial property claims fell in 2006
  • Commercial property claims costs resulting from fire, business interruption and weather damage all fell in 2006
  • Commercial fire numbers fell in 2005
  • Weather claims costs declined in 2006
  • Business interruption claims costs, following fire and weather damage, fell in 2006
  • Theft claims costs increased due to higher average claim values in 2006
  • The industry remains concerned about future losses related to fire and flood as recent changes have heightened uncertainty in both
  • A fireworks blaze ended an otherwise quiet year for fire related property claims
  • The future state of Britain's flood defences have become a source of concern for insurers due to recent policy changes
  • Future risks are also seen as becoming more unpredictable as climate change alters rain and storm patterns
  • Fire regulation changes that came into effect in Oct 2006 also decrease the ability of insurers to gauge risk accurately
  • Total losses have increased, with insurers noticing more large fire losses in 2006
• Chapter 4 Distribution
  • Introduction
  • Commercial insurance is largely distributed through intermediaries, however, there are signs of growth in other channels
  • Brokers still dominate the distribution of commercial lines insurance
  • Independent intermediaries are still the major distribution channel within commercial lines insurance
  • Direct insurers hold a relatively small share of the commercial market, however, growth is expected to pick up in terms of policy numbers
  • Direct insurers hold a small share of the commercial insurance market
  • Insurers are expecting to see growth in the direct channel
  • The growth of the direct channel will be limited by low average premium spends and buying behaviour
  • Banks and building societies remain small players in the commercial insurance market
  • There is potential for retailers and affinity groups to grow their market share, however, this is limited by the need for advice
  • imarket makes interactions between insurers and brokers more efficient and further progress is expected in the coming years
  • imarket is an internet portal for brokers that allows multiple quotes to be generated from one application form
  • imarket added two new carriers in 2005 and 2006
  • Further integration with software houses would benefit imarket
• Chapter 5 Competitive Dynamics
  • Introduction
  • In 2005, nine of the top 10 commercial property insurers increased market share, as the market became more consolidated
  • Most top 10 commercial property insurers increased market share in 2005
  • Royal & SunAlliance gained the most commercial property market share in 2005
  • NIG increased premium income and market share
  • Ecclesiastical moved up the commercial property rankings in 2005
  • Allianz maintained its position despite an increase in premium income
  • Market leader Norwich Union continued to grow its commercial property insurance market share
  • St. Paul joined the top 10 commercial property insurers for the first time in 2005
  • Zurich increased its market share marginally
  • FM Insurance recovered market share in 2005
  • AXA retained its fourth place ranking
  • The commercial property market grew increasingly consolidated in 2005, while Lloyd's and other non-ABI companies increased their share
  • The top 10 commercial market insurers gained market share at the expense of players outside the top 20
  • Lloyd's and other non-ABI companies accounted for an increasing share of the property insurance market in 2005
  • The top 10 commercial property insurers experienced mixed results with their ratios in 2005, with St. Paul experiencing the lowest combined ratio
  • All top 10 commercial property insurers remain profitable even as soft market conditions have impacted combined ratios
  • Premium rates fell in the SME sector while a number of new underwriting agencies are targeting this market
  • Falling premium rates continued in 2006 as competitive pressures moved into SME lines
  • Three significant new start-up underwriting agencies entered the commercial insurance market in 2006, targeting the SME sector
  • Start-up ABC Insurance was bought by Liverpool VIctoria
  • M4 Underwriting started writing business in June 2006, backed by Allianz
  • Start-up Arista Insurance will also target the SME market
  • Broker networks and consolidation among brokers continued to proliferate, while large insurers have bought into the distribution chain
  • Broker networks and consolidators stepped up activity in 2006
  • Insurers have sought to safeguard access to the market through broker acquisitions
• Chapter 6 The Future Decoded
  • Introduction
  • The commercial property insurance market experiences strong price competition, and moves into an underwriting loss in 2007
  • The commercial property insurance market is experiencing intense competition
  • Datamonitor forecasts that the commercial property insurance market will reach 5.5 billion in GWP by 2011
  • The commercial property insurance market is forecast to move into an underwriting loss in 2007
  • In the optimistic scenario, the UK commercial property insurance market is forecast to reach 5.7 billion in GWP by 2011 if price competition is muted
  • The commercial property insurance market experiences intense competition in 2006
  • Commercial property insurance GWP dips in 2007, followed by increases between 2008 and 2011
  • In the optimistic scenario, the commercial property insurance market regains profitiability in 2009
  • In the pessimistic scenario, strong rate cutting in 2007 leads the commercial property insurance market to record stronger losses
  • The commercial property insurance market experiences intense competition in 2006 and in 2007
  • The commercial property insurance market sees a strong contraction in 2007 followed by a period of growth between 2008 and 2011
  • Underwriting losses peak at 254 million in 2008
• Chapter 7 Appendix
  • Definitions of ABI terms
  • Brokers
  • National brokers
  • Other intermediaries & brokers
  • Chain brokers & telebrokers
  • Direct
  • Other company agents
  • Utilities/retailers/affinity groups
  • Company staff
  • Banks/building societies
  • Written premiums
  • Supplementary data
  • Methodology
  • FSA Return changes
  • Total commercial property
  • Pre-2005 definitions for lines of business
  • Property
  • Current readings
  • Future readings
  • Do you need more information?
  • Datamonitor Financial Services Consulting
  • SPP writing team
• List of Tables
  • Table 1: Commercial property insurance GWP, 2001-2006e
  • Table 2: Commercial property insurance underwriting account, 2001-5
  • Table 3: Commercial property insurance claims, expense and underwriting ratios, 2001-5
  • Table 4: Gross incurred commercial property claims by peril, 2002-6
  • Table 5: Number of UK fires, by location, 2001-5
  • Table 6: Commercial property insurance weather claims costs, 2002-6
  • Table 7: Cost of business interruption claims by cause, 2002-6
  • Table 8: Total cost of commercial property insurance theft claims, 2002-6
  • Table 9: Number of commercial property theft claims, 2002-6
  • Table 10: Average value of commercial property theft claims, 2002-6
  • Table 11: Market share of distribution channels in the commercial general insurance market, 2002-5
  • Table 12: Market share of the top 10 commercial property insurers, 2001-5
  • Table 13: Market share of the top 10 commercial property insurers compared with those ranked 11-20 and those outside the top 20, 2001-5
  • Table 14: Property GWP split between ABI members and Lloyd's / Other, 1995-2005
  • Table 15: Combined ratios of the 10 largest commercial property insurers, 2005
  • Table 16: Neutral scenario: Forecast GWP for the commercial property insurance market, 2001-11f
  • Table 17: Neutral scenario: Forecast underwriting result for the commercial property insurance market, 2001-11f
  • Table 18: Optimistic scenario: Forecast GWP for the commercial property insurance market, 2001-11f
  • Table 19: Optimistic scenario: Forecast underwriting result for the commercial property insurance market, 2001-11f
  • Table 20: Pessimistic scenario: Forecast GWP for the commercial property insurance market, 2001-11f
  • Table 21: Pessimistic scenario: Forecast underwriting result for the commercial property insurance market, 2001-11f
  • Table 22: Top ten commercial property insures by premium income, 2001-5
• List of Figures
  • Figure 1: The top 10 insurers increased their share of the commercial property market in 2005 at the expense of insurers outside of the top 20
  • Figure 2: Commercial property insurance GWP contracted in 2005 and 2006
  • Figure 3: The commercial property insurance underwriting result fell by over a third in 2005
  • Figure 4: Commercial property insurance claims and underwriting ratios both deteriorated in 2005
  • Figure 5: Fire, business interruption and weather claims costs relating to commercial property insurance fell in 2006
  • Figure 6: The number of commercial property fires fell in 2005
  • Figure 7: The cost of commercial property weather claims declined in 2006
  • Figure 8: Business interruption claims costs fell in 2006 following the lack of weather events
  • Figure 9: 2006 saw a drop in the number of commercial property theft claims but an increase in the average value of each claim
  • Figure 10: A fire decimated a fireworks factory in East Sussex in 2006
  • Figure 11: National brokers dominate the distribution of commercial insurance
  • Figure 12: imarket generates a number of quotes, while the user only has to input the risk details once
  • Figure 13: Norwich Union was the largest commercial property insurer in 2005 with a market share of 18.4 per cent
  • Figure 14: Royal & SunAlliance gained 4 per cent of the UK commercial property insurance market in 2005
  • Figure 15: The top 10 insurers increased their share of the commercial property market in 2005 at the expense of insurers outside of the top 20
  • Figure 16: The vast majority of property business remains with ABI companies but the amount written outside the company market has grown
  • Figure 17: All top 10 commercial property insurers were profitable in 2005
  • Figure 18: Key to the relative importance of forecast variables
  • Figure 19: Neutral scenario key variables affecting commercial property GWP, 2006e-11f
  • Figure 20: Neutral scenario: commercial property insurance GWP declines in 2007 before increasing between 2008 and 2011
  • Figure 21: The commercial property insurance market is forecast to move into an underwriting loss in 2007 with losses peaking in that year at 111 million
  • Figure 22: Optimistic scenario: key variables affecting commercial property GWP, 2006e-11f
  • Figure 23: Commercial property insurance GWP reaches 5.7 billion in GWP by 2011
  • Figure 24: The commercial property insurance market moves into an underwriting loss in 2007 before recovering profitability in 2008
  • Figure 25: Pessimistic scenario: key variables affecting commercial property GWP, 2006e-11f
  • Figure 26: Commercial property insurance GWP reaches 5.5 billion in 2011
  • Figure 27: The commercial property insurance market is forecast to move into a loss in 2007 and for losses to peak at 254 million in 2008