Image result for Bank of England

London – Some British insurers have been too quick to tap reserves for propping up profits, the sector’s top regulator said on Wednesday in its most direct warning yet.

David Rule, head of insurance supervision at the Bank of England’s Prudential Regulation Authority, said despite falling premium rates, general insurer profits have for years been sustained by the absence of big payouts and releases of reserves.

Levels of reserve releases were now running at their highest level for thirty years, Rule said in his first speech in the job.

Insurers can tap reserves if these are “genuinely” redundant, meaning the likelihood of future claims has been reduced – but not as means of sustaining reported profits, Rule said.

PRA calculations show that the release of reserves assumes very low future claims “inflation”.

“If the future trend is in fact in line with past inflation, booked reserves would need to be 25 percent higher than currently assumed,” Rule told an industry conference in Dublin.

“Insurers… have critical questions to answer about the future direction of claims inflation.”

Advertisements

0 Comments Post your own or leave a trackback: Trackback URL

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: