Commercial Property Insurance in the UK - Key Trends and Opportunities to 2017

Commercial Property Insurance in the UK - Key Trends and Opportunities to 2017

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Gross written premiums in the commercial property insurance category recorded sustained growth throughout the review period (2008-2012), rising at a compound annual growth rate (CAGR) of 6.79%. Premiums increased at an annual rate of 6.8% in 2012, reaching a total of GBP6.72 billion; the highest level in five years.

Commercial property insurance claims paid declined by 5.5% in 2012, but this belies the rapid growth recorded since 2008. Payouts rose at a CAGR of 57.29% over the five years to 2012, while claims incurred increased at a CAGR of 28.61% during the same period. The UK has experienced frequent flooding since 2000, including two of the wettest years on record since 2008.

Despite weakness in the commercial construction market and flagging business sentiment due to poor economic conditions, the rise in premiums was driven by high claims related to severe weather and instances of civil unrest. Tentative economic recovery and improving business conditions drove growth towards the end of the review period.

A large claims burden, limited investment returns due to the UK's low interest rate environment, and rising expenses have hindered the profitability of insurers in the category. A combined operating ratio of 111.8% was registered in 2012. Although it exceeds the 100% breakeven threshold, it marks an improvement on profitability levels recorded during 2008-2010.

Following the expiry of the Statement of Principles in June 2013, Flood Re was established by the government and the insurance industry. Unlike its predecessor, Flood Re excludes small businesses from guaranteed flood insurance at affordable prices, and will result in upward pressure on costs and premiums for insurers and their commercial customers.

Despite downside forces, growth in commercial property gross written premiums will prevail over the forecast period (2013-2017) as the economic recovery gains traction, business confidence improves and commercial construction activity increases. Premiums are expected to rise to GBP8.22 billion in 2017, representative of a CAGR of 4.34% over the five years from 2013.

Key Highlights
  • Premium growth was maintained in 2012
  • Commercial property insurance payouts have surged
  • High claims led insurers to raise rates
  • Profitability has been elusive
  • Insurers will face headwinds following legislative changes
  • Moderate growth in gross written premiums is expected
  • This report provides market analysis, information and insights into the UK commercial property insurance business
  • It provides a global snapshot of market size
  • It analyses drivers and the outlook for the market
  • It provides information on distribution channels
  • It covers deals, news and regulatory developments
Reasons to Purchase
  • Gain an understanding of the UK commercial property insurance market size
  • Learn about the performance of market drivers and distribution channels
  • Understand the competitive landscape in terms of performance, profitability and product innovation
  • Find out more on key deals and recent developments in the market

Table of Contents

1 Executive Summary
2 Introduction
2.1 What is this Report About?
2.2 Definitions
2.3 Methodology
3 Market Analysis
3.1 Market Size
3.1.1 Commercial property
3.1.2 Consequential loss
3.1.3 Contractors or engineering risks
3.1.4 Penetration and density
3.2 Claims
3.2.1 Claims review
3.2.2 Claims outlook
3.3 Market Drivers
3.4 Market Outlook
3.5 Distribution Channels
3.5.1 Distribution outlook
3.6 Reinsurance
4 Competitive Landscape
4.1 Profitability
4.1.1 Investment returns
4.1.2 Profitability outlook
4.2 Review - The Best Performers of
4.3 Product Innovation
4.4 Commercial Property Insurance - SWOT Analysis
5 Porter's Five Forces Analysis
5.1 Bargaining Power of Suppliers: Low
5.2 Bargaining Power of Buyers: Medium
5.3 Barriers to Entry: Medium
5.4 Intensity of Rivalry: Medium to High
5.5 Threat of Substitution: Low
6 Deals
6.1 Towergate Sells Commercial Property Division
6.2 Aviva Joins the PowerPlace Panel for Commercial Property
6.3 Covea Extends Deal with Risk Control Firm
6.4 Insurers Move Into Takaful
6.5 QBE Becomes Sole Capacity Provider for Wholesale Broker
7 News
7.1 BIBA Flags Concerns over Flood Re
7.2 FM Global Named Best Commercial Property Insurer
7.3 FM Global's Risk Innovation
7.4 Increase in Commercial Property Insurance Complaints
7.5 Axa Survey Reveals Gaps in the Market
8 Regulation and Compliance
8.1 Upcoming Regulations
8.1.1 Flood Re
8.1.2 Review of the Riot (Damages) Act
8.1.3 Solvency II
9 Macroeconomic Backdrop
9.1 Real GDP Growth
9.2 Commercial Property Market Dynamics
9.3 Private Sector Lending
9.4 Interest Rates
9.5 Business Demographics
10 Company Profiles
10.1 ACE European Group Ltd - Company Overview
10.1.1 ACE European Group Ltd - key facts
10.1.2 ACE European Group Ltd - main products
10.1.3 ACE European Group Ltd - main competitors
10.1.4 ACE European Group Ltd - key employees
10.2 Allianz Insurance Plc - Company Overview
10.2.1 Allianz Insurance Plc - key facts
10.2.2 Allianz Insurance Plc - main products
10.2.3 Allianz Insurance Plc - main competitors
10.2.4 Allianz Insurance Plc - key employees
10.3 Aviva Plc - Company Overview
10.3.1 Aviva Plc - key facts
10.3.2 Aviva Plc - main products
10.3.3 Aviva Plc - main competitors
10.3.4 Aviva Plc - key employees
10.4 Axa UK Plc - Company Overview
10.4.1 Axa UK Plc - key facts
10.4.2 Axa UK Plc - main products
10.4.3 Axa UK Plc - main competitors
10.4.4 Axa UK Plc - key employees
10.5 FM Insurance Company Ltd - Company Overview
10.5.1 FM Insurance Company Ltd - key facts
10.5.2 FM Insurance Company Ltd - main products
10.5.3 FM Insurance Company Ltd - main competitors
10.5.4 FM Insurance Company Ltd - key employees
10.6 Great Lakes Reinsurance (UK) Plc - Company Overview
10.6.1 Great Lakes Reinsurance (UK) Plc - key facts
10.6.2 Great Lakes Reinsurance (UK) Plc - main products
10.6.3 Great Lakes Reinsurance (UK) Plc - main competitors
10.6.4 Great Lakes Reinsurance (UK) Plc - key employees
10.7 QBE Insurance (Europe) Ltd - Company Overview
10.7.1 QBE Insurance (Europe) Ltd - key facts
10.7.2 QBE Insurance (Europe) Ltd - main products
10.7.3 QBE Insurance (Europe) Ltd - main competitors
10.7.4 QBE Insurance (Europe) Ltd - key employees

Companies Mentioned:

ACE European Group Ltd
Allianz Insurance Plc
Aviva Plc
Axa UK Plc
FM Insurance Company Ltd
Great Lakes Reinsurance (UK) Plc
QBE Insurance (Europe) Ltd
Royal & Sun Alliance Insurance Plc
XL Group Plc
Zurich Insurance Plc