London Market Premium Increases Reported

London Market Premium Increases Reported

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

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

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

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

"There has been much talk in recent years about flattening the insurance cycle with depressed investment markets and the employment of better risk modeling techniques boosting underwriting discipline," he said. "It will be interesting to see whether this theory really is born out by experience."

The IUA's statistics are for premiums and claims processed by underwriting year and show the development of each year's business in terms of the insurance contracts which commenced in that year.

IUA said the premiums involved are mostly paid within two to three years of the inception of a contract while claims can continue accumulating for many years afterwards. Thus, while the 2004 figures give a rough early indication of how the market has performed, there is still considerable potential for outstanding claims to change the picture significantly.

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

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

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

According to the organization, it is too soon to draw any definitive conclusions about claims trends, and in most classes of business it can be assumed that the paid claims figure will continue to deteriorate for several years after the original underwriting year.

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

In addition to providing an overall picture of the marine, aviation and transport market, the IUA's analysis also shows the results for individual classes of business. The organization said that cargo, hull, energy, liability and aviation all appear to be broadly following the overall pattern for premiums and claims in 2004.

IUA said it is currently exploring plans to expand further the statistics it makes available to the market both as a strategic tool and to assist underwriters. The underwriting figures have already been expanded in recent years to include non-marine business and are now produced on a quarterly basis.

"Differing account profiles are clearly visible in the current numbers," said IUA's statistics manager, Pamela Frood. "In some classes premium is generally paid at the commencement of the policy period, while in others it will be collected during the course of the period of the risk. The same ?time lag' problem is even more true with claims and, in addition, many payments are processed direct between companies and not via the bureau."

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

IUA said its statistics show the overall market position, noting that individual companies may not share this experience because they may not participate in a particular class of business, or within any single class their risk portfolio may differ from the average.

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

Premiums shown are net of commission and brokerage.