2018 Optima: General Insurance Industry bounces back.
Finity’s state of the industry annual publication, Optima, has revealed FY18 was a ‘bounce back’ year for the General Insurance industry, with the reported industry insurance margin (or insurance trading result) being reported as a healthy16%, 2% higher than in FY17.
In terms of Return on Equity (ROE), the industry hit that magic 15% target for the first time since 2014. So what were the key drivers of this year’s improved result? According to Andy Cohen, Finity Principal, the industry upturn has been due to a combination of factors. “Rate increases, particularly in Private Motor, assisted the top line while benign weather and low cat activity improved the claims line for a number of classes. In Private Motor, which accounts for one quarter of industry net premium, insurers seem to have put the brakes on the strong claims inflation seen in recent years – coupled with the rate increases achieved, this class has almost returned to target profitability.”
“Last but not least, prior year reserve releases in long tail classes were yet again very strong, with CTP alone contributing another $1 billion to the bottom line,” said Andy Cohen.
Looking beyond 2018, the report predicts the market will continue to harden and profitability for the industry is estimated to remain sound albeit a little below target – with margins and ROEs in the 10 to 15% range for the next three years.
Access OptimaLite here