A.M. Best Special Report: Non-Life Margins Under Pressure, Despite Rate Increases.OLDWICK, N.J. -- Last year was the most difficult in recent history for the global economy. What started as a crisis in U.S. subprime mortgages quickly spread through the global banking system and the broader financial system, causing credit markets to close. Governments were forced to take action to support failing banks amid falling equity markets. World economies, including that of the United Kingdom, fell into recession. In view of the challenging operating environment In computing, an operating environment is the environment in which users run programs, whether in a command line interface, such as in MS-DOS or the Unix shell, or in a graphical user interface, such as in the Macintosh operating system. , the U.K. non-life In the physical sciences, non-life is an umbrella term set to distinguish or characterize those inanimate chemical precursors found in the primeval soup of the early years of planetary evolution from which life, theoretically, evolved or came into existence. insurance market performed well in 2008. The absence of large weather-related losses and positive prior-year development led to improved overall underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. performance compared with 2007. In addition, the cautious investment strategies of the majority of market participants The term market participant is used in United States constitutional law to describe a U.S. State which is acting as a producer or supplier of a marketable good or service. When a state is acting in such a role, it may permissibly discriminate against non-residents. provided some protection against the large declines in equity and bond markets. * In 2009, A.M. Best expects a solid overall performance from the U.K. non-life market, assuming normal weather-related claims experience for the remainder of the year. * Premium rates are rising, although insurers are striving for more substantial increases amid intense competition and a weak economy. * The economic downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. is likely to have a negative impact on loss experience, with an increase in genuine and fraudulent The description of a willful act commenced with the Specific Intent to deceive or cheat, in order to cause some financial detriment to another and to engender personal financial gain. claims. * Reserve releases are expected to support calendar-year performance once again in 2009; however, it is unlikely that substantial releases can be sustained in the medium term. * Low interest rates and volatile equity markets mean insurers can no longer rely on investment earnings to offset weak technical results. To access a copy of this special report, please visit http://www3.ambest.com/bestweek/bestweekreports.asp?rt=ir. Founded in 1899, A.M. Best Company is a global full-service full-ser·vice adj. Associated with or offering complete service: full-service gasoline pumps; full-service banks. credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com. |
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