These losses have been driven by a worsening of underwriting performance in the pecuniary loss market, with the business line falling to a £656.5m underwriting loss for 2020. This compares to an underwriting profit of £96.7m for 2019.
These losses also coincided with a drop in gross written premiums (GWP) in the sector.
GWP across the pecuniary loss market fell by more than a quarter to £530.2m over 2020, compared to £739.1m in 2019 and £946.3m for 2018, with business interruption and other pecuniary loss claims more than quadrupling over the last 12 months.
The tough market conditions have also led to a hike in FinPro premiums, with year-on-year price increases in the UK market peaking at 90% in the fourth quarter of 2020 according to the Marsh Global Insurance Market Index.
While the sector has already pushed through substantial price increases, more will be needed to offset the losses already experienced by the market to date.
Premiums have increased by more than 50% year-on-year in every quarter since the start of the pandemic, but financial pressures will continue to affect businesses as the world’s economies continue to emerge from the pandemic.
This means that insurers must brace themselves for further failures among its customer base, which will only add further downward pressure on an already shrinking premium base.
Across the whole of the Lloyd’s market only two business lines achieved underwriting profits for 2020, with motor business reporting a profit of more than £42.2m for 2020 (2019: £8.6m), undoubtedly aided by the reduction of driving miles during the pandemic.
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