UK non-life insurers 4Q15 profits hit by weather events

The profitability of UK non-life insurers was affected by a series of weather events in the fourth quarter of 2015, according to a report by Fitch Ratings.

Despite this, flood losses were within the annual budget for weather-related losses for most insurers, due to benign weather during the rest of the year.

Fitch said it does not believe that the winter flood losses are large enough to significantly increase household insurance premiums but claimed that the introduction of Flood Re in April 2016 and an increase in insurance premium tax may slow the recent fall or create a modest temporary rise.

Fitch expects competition in the segment to remain strong as more customers prefer to shop around for a better deal through price comparison websites and as more insurers look to diversify into household insurance.

Low interest rates continue to hurt UK company market insurers' investment income, according to the firm. As an increasing proportion of insurers' assets are reinvested at lower returns, Fitch expects investment income to further decline in 2016.

The majority of UK non-life insurers reported strong Solvency II capital ratios at end-2015. Lower capitalisation requirements compared with life insurers reflect typically shorter-tail liabilities, less volatile earnings and conservative investment portfolios, according to the report.