London Market Premium Increases Reported

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NU Online News Service, April 15, 2:59 p.m.EDT?Premium levels for non-marine insurance business inthe London company market increased ?33.3 million ($63 million atcurrent exchange rates) in 2004 compared with the prior year,according to the International Underwriting Association. [@@]

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The U.K. insurance trade group reported that a total of ?1.7billion ($3.1 billion) worth of premiums have so far been processedfor the company market for the 2004 underwriting year. This is upfrom ?1.6 billion ($3 billion) for the comparable 2003 figure.

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IUA said premium levels were ?1.59 billion ($3 billion) in 2002and ?1.3 billion ($2.5 million) in 2001 when the IUA first beganpublishing figures for different segments of the market.

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"Fundamentally our market does appear to be in good health,although a more exact picture will only emerge as outstandingpremiums and claims are processed," said IUA Chief Executive DaveMatcham.

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"There has been much talk in recent years about flattening theinsurance cycle with depressed investment markets and theemployment of better risk modeling techniques boosting underwritingdiscipline," he said. "It will be interesting to see whether thistheory really is born out by experience."

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The IUA's statistics are for premiums and claims processed byunderwriting year and show the development of each year's businessin terms of the insurance contracts which commenced in thatyear.

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IUA said the premiums involved are mostly paid within two tothree years of the inception of a contract while claims cancontinue accumulating for many years afterwards. Thus, while the2004 figures give a rough early indication of how the market hasperformed, there is still considerable potential for outstandingclaims to change the picture significantly.

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Among business segments, IUA said that in the marine, aviationand transport classes of business total premiums processed so farfor 2004 are ?674 million ($1.3 billion).

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The trade group said the latest premium figure is lower than thecomparable 12-month result for 2003 at ?747.5 million ($1.4billion), but still considerably higher than the end-of-year levelsrecorded throughout the late 1990s and up to 2001.

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The development of claims levels for the past few years, IUAsaid, also appears to be much improved compared to the generalposition in the second half of the 1990s.

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According to the organization, it is too soon to draw anydefinitive conclusions about claims trends, and in most classes ofbusiness it can be assumed that the paid claims figure willcontinue to deteriorate for several years after the originalunderwriting year.

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IUA said both the non-marine and total marine figures quotedexclude excess-of-loss business to avoid representing duplicationof market premium.

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In addition to providing an overall picture of the marine,aviation and transport market, the IUA's analysis also shows theresults for individual classes of business. The organization saidthat cargo, hull, energy, liability and aviation all appear to bebroadly following the overall pattern for premiums and claims in2004.

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IUA said it is currently exploring plans to expand further thestatistics it makes available to the market both as a strategictool and to assist underwriters. The underwriting figures havealready been expanded in recent years to include non-marinebusiness and are now produced on a quarterly basis.

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"Differing account profiles are clearly visible in the currentnumbers," said IUA's statistics manager, Pamela Frood. "In someclasses premium is generally paid at the commencement of the policyperiod, while in others it will be collected during the course ofthe period of the risk. The same ?time lag' problem is even moretrue with claims and, in addition, many payments are processeddirect between companies and not via the bureau."

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She said it is "therefore exceptionally difficult to properlyanalyze the market from a quick snapshot picture taken at the endof any 12-month period, but gradually the IUA's statistics build upto an effective guide of long-term trends."

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IUA said its statistics show the overall market position, notingthat individual companies may not share this experience becausethey may not participate in a particular class of business, orwithin any single class their risk portfolio may differ from theaverage.

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The figures are based on contracts processed by London marketcompanies using the Ins-sure (former London Processing Centre)marine, aviation and non-marine coding system. They do not includepremiums, claims or recoveries which are processed direct withreinsurers and not via the Ins-sure bureau.

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Premiums shown are net of commission and brokerage.

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