Abstract
Overview
Introduction
In 2006, the commercial property insurance market contracted as soft market conditions took hold. This brief provides an in-depth analysis of the current and future commercial property market in the UK, analyzing the key trends in premium income, claims and profitability.
Scope
- Extensive analysis of GWP and underwriting result are provided for the commercial property insurance market
- A discussion of trends in commercial property claims and issues that will effect future risks.
- Three scenarios forecasting the market' s GWP growth until 2011, based on primary research and in-house expertise.
Report Highlights
Commercial property insurance GWP declined by 6.9 per cent in 2006 to £4.9 billion. The principle driver for the decline was increased competition.
Commercial property claims costs decreased significantly in 2006, following a difficult year in 2005. Claims costs resulting from fire and weather damage declined, and as a result, business interruption costs also moderated
On balance the market is expected to have seen further rate decreases in 2006 and is forecast to see premium rate deflation in 2007.
Reasons to Purchase
- Gain insight into the issues currently affecting the commercial property market' s growth and profitability.
- Understand the trends and recent developments within commercial property claims
- Develop your future commercial property strategy using Datamonitor' s unique forecasts
Table of Contents
- CHAPTER 1 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 38.6per cent in 2005
- Commercial property insurance performance ratiosdeteriorated in 2005
- The claims ratio increased after a long run ofimprovements
- The expense ratio increased by 4.1 percentage points in2005
- The underwriting ratio also deteriorated in 2005 as boththe 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 andweather damage, fell in 2006
- Theft claims costs increased due to higher average claimvalues in 2006
- Commercial property claims costs resulting from fire,business
interruption and weather damage all fell in 2006
- The industry remains concerned about future losses relatedto fire and
flood as recent changes have heightened uncertainty in both
- A fireworks blaze ended an otherwise quiet year for firerelated property claims
- The future state of Britain' s flood defences have become asource of concern for insurers due to recent policy changes
- Future risks are also seen as becoming more unpredictableas climate change alters rain and storm patterns
- Fire regulation changes that came into effect in Oct 2006also decrease the ability of insurers to gauge risk accurately
- Total losses have increased, with insurers noticing morelarge fire losses in 2006
- CHAPTER 2 THE FUTURE DECODED
- Introduction
- The commercial property insurance market experiencesstrong price
competition, and moves into an underwriting loss in 2007
- The commercial property insurance market is experiencingintense competition
- Datamonitor forecasts that the commercial propertyinsurance market will reach £5.5 billion in GWP by 2011
- The commercial property insurance market is forecast tomove into an underwriting loss in 2007
- In the optimistic scenario, the UK commercial propertyinsurance market
is forecast to reach £5.7 billion in GWP by 2011 ifprice competition is muted
- The commercial property insurance market experiencesintense competition in 2006
- Commercial property insurance GWP dips in 2007, followedby increases between 2008 and 2011
- In the optimistic scenario, the commercial propertyinsurance market regains profitiability in 2009
- In the pessimistic scenario, strong rate cutting in 2007leads the
commercial property insurance market to record stronger losses
- The commercial property insurance market experiencesintense competition in 2006 and in 2007
- The commercial property insurance market sees a strongcontraction in 2007 followed by a period of growth between 2008 and 2011
- Underwriting losses peak at £254 million in 2008
- CHAPTER 3 APPENDIX
- Premium income measures
- Earned premiums
- Gross Premium
- Net Premium
- Written premiums
- Current readings
- Future readings
- Do you need more information?
- Datamonitor Financial Services Consulting
- SPP writing team
- Premium income measures
- List of Tables
- Table 1: Commercial property insurance GWP, 2001-2006e
- Table 2: Commercial property insurance underwritingaccount, 2001-5
- Table 3: Commercial property insurance claims, expenseand underwriting ratios, 2001-5
- Table 4: Gross incurred commercial property claims byperil, 2002-6
- Table 5: Number of UK fires, by location, 2001-5
- Table 6: Commercial property insurance weather claimscosts, 2002-6
- Table 7: Cost of business interruption claims by cause,2002-6
- Table 8: Total cost of commercial property insurancetheft claims, 2002-6
- Table 9: Number of commercial property theft claims,2002-6
- Table 10: Average value of commercial property theftclaims, 2002-6
- Table 11: Neutral scenario: Forecast GWP for thecommercial property insurance market, 2001-11f
- Table 12: Neutral scenario: Forecast underwriting resultfor the commercial property insurance market, 2001-11f
- Table 13: Optimistic scenario: Forecast GWP for thecommercial property insurance market, 2001-11f
- Table 14: Optimistic scenario: Forecast underwritingresult for the commercial property insurance market, 2001-11f
- Table 15: Pessimistic scenario: Forecast GWP for thecommercial property insurance market, 2001-11f
- Table 16: Pessimistic scenario: Forecast underwritingresult for the commercial property insurance market, 2001-11f
- List of Figures
- Figure 1: Commercial property insurance GWP contractedin 2005 and 2006
- Figure 2: The commercial property insurance underwritingresult fell by over a third in 2005
- Figure 3: Commercial property insurance claims andunderwriting ratios both deteriorated in 2005
- Figure 4: Fire, business interruption and weather claimscosts relating to commercial property insurance fell in 2006
- Figure 5: The number of commercial property fires fellin 2005
- Figure 6: The cost of commercial property weather claimsdeclined in 2006
- Figure 7: Business interruption claims costs fell in2006 following the lack of weather events
- Figure 8: 2006 saw a drop in the number of commercialproperty theft claims but an increase in the average value of each claim
- Figure 9: A fire decimated a fireworks factory in EastSussex in 2006
- Figure 10: Key to the relative importance of forecastvariables
- Figure 11: Neutral scenario key variables affectingcommercial property GWP, 2006e-11f
- Figure 12: Neutral scenario: commercial propertyinsurance GWP declines in 2007 before increasing between 2008 and 2011
- Figure 13: The commercial property insurance market isforecast to move into an underwriting loss in 2007 with losses peaking inthat year at £111 million
- Figure 14: Optimistic scenario: key variables affectingcommercial property GWP, 2006e-11f
- Figure 15: Commercial property insurance GWP reaches £5.7billion in GWP by 2011
- Figure 16: The commercial property insurance marketmoves into an underwriting loss in 2007 before recovering profitability in2008
- Figure 17: Pessimistic scenario: key variables affectingcommercial property GWP, 2006e-11f
- Figure 18: Commercial property insurance GWP reaches £5.5billion in 2011
- Figure 19: The commercial property insurance market isforecast to move into a loss in 2007 and for losses to peak at £254million in 2008
