Adequate risk-adjusted pricing and the expectation of modest real-term rate increases in most of lines of UK general insurance business mean the sectors outlook remains stable, according to Moodys.

In a report published yesterday, the ratings agency said that, with motor and property lines accounting for over 70% of the UK GI industry, their performance will impact heavily on the future profitability of the sector.
Personal motor insurance has been persistently unprofitable in recent years, Moody's said, and insurers have struggled to combat the adverse impact of bodily injury claims and claims farming, despite double digit year-on-year rate increases in recent years.
However, as these stronger rates earn through income statements, Moody's expected the combined ratio on motor insurance to improve by almost 100% over the next 12 to 18 months.
Further premium rate increases are expected for property insurance in 2012 - in nominal terms at least - as insurers seek to return personal property, traditionally one of UK insurers' most profitable lines of business, to underwriting profitability.
David Masters, a Moody's assistant vice president, said: 'Despite the fact that investment returns remain under pressure, due to low interest rates and conservative portfolios, we view the profitability trends as being sufficient to maintain a stable outlook on the sector, but insufficient to lead to a transformational change in profitability.'
Moody's said commercial rates (except fleet motor rates) remain mooted in real terms and the market has contracted from gross premiums written of £14.7bn in 2006 to £14.2bn in 2010.
It did, however, find evidence that conditions were improving, with many major insurers reporting rate increases of between 4% and 6% in commercial liability and property classes.
But Mr Masters said that the pressure exerted by the UK's 'sluggish' recovery was the main near-to-medium term downside risk for the sector and would mean insurers find it hard to grow their revenues. A prolonged economic downturn would pressure both insurers' net revenues and profits.
'Some insurance products are compulsory, for example, third-party motor insurance, whilst others such as property construction, trade and business interruption, are at least partially contingent on the level of economic activity,' he added.