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2012 could be red letter year for home insurer profitbility

Data published on the profitability of UK Home insurers’ underwriting has revealed a 10% improvement on the sector’s performance during 2011.

The industry’s net combined ratio in 2011 was 89% – a 10% improvement on the previous year. According to Deloitte, The market’s revenue remains stable with total annual premiums of £6.5bn.

Deloitte said 2011 was the fourth consecutive year when home insurance premiums either met or exceeded the cost of claims and expenses.

Home insurers in 2011 posted a net combined ratio of 89%, which means the combined cost of claims and expenses was £89 for every £100 of net earned premium. In 2007, the last year to experience widespread flooding, the net combined ratio was 120%.

James Rakow, insurance partner at Deloitte, said: “At an industry level, the size of the home insurance market remains stable with annual premiums worth about £6.5bn, and 2011 was the fourth consecutive year when premiums met or exceeded claimsand expenses. Profitability improved in 2011 because it was a relatively benign year for weather-related losses compared to 2010, when the insurance industry was hit hard by the extremely cold weather that Britain experienced in the December.

“The cost of claims arising from the floods that have swept across the country over the past few weeks will be the greatest since the 2007 flood losses, and will make insurers, reinsurers and other agencies look again at their flood models to check how well they predict the cost of flood claims. The full costs of the claims from this summer’s floods have yet to be assessed but previous experience has shown that widescale flooding can have a significant impact on the level of claims borne by insurance companies. In 2007 this pushed them into losses for their home insurance accounts.”

About Ralph Savage (138 Articles)
Insurance and legal journalist Ralph Savage has written extensively for the financial and professional services sectors, most notably as News Editor of Post Magazine. He ghost writes regularly on behalf of FTSE 250 CEOs, leading counsel and senior professionals including solicitors, insurers, accountants and brokers.

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