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PRA Letter - Observations for your Attention based on Feedback from the Monitoring-the-Market Questionnaire

The PRA has shared observations based on feedback from the recent questionnaire completed by London market insurers titled: ‘monitoring-the- market’

http://www.bankofengland.co.uk/pra/Documents/about/druleletter220617.pdf

 

The purpose is for the PRA to get a quantitative and qualitative sector-wide understanding of current market conditions and identify those insurers that are most affected by them. Key areas it covers are:

  • Risk adjusted rates continue to deteriorate (although are moderating in most lines
  • Terms and conditions are widening
  • Firms believe profitability is being maintained, but this suggests a potential disconnect between current views of pricing levels and assessments of Risk Adjusted Rate Changes (RARC)
  • New business continues to be viewed more favourably than renewed business
  • Smaller insurers generally have a more favourable view on rate adequacy
  • The majority of firms had concerns about changing distribution channels

 

The PRA state that given the findings in this review, they are concerned that some firms may have insufficiently captured current market conditions and the potential impact of broadening terms and conditions in their risk management. Over the course of 2017, they will carry out a number of supervisory initiatives to improve their understanding of how individual firms are being affected by current market conditions.