BoE responds to risks in life and general insurance sectors

David Rule, Executive Director of Insurance Supervision at BoE delivered a speech on 6 July at the Association of British Insurers (ABI) with a focus on risks and BoE’s supervisory priorities in the life and general insurance sectors.

BoE is concerned with risk concentrations and the impact of the current market conditions. For example, in respect of life insurance a potential concern is that the shift towards direct investments might in future lead to a concentration of exposure to UK property.

With regard to general insurance, BoE is concerned with the loosening of terms and conditions; the underestimation of risks; and the temptation for insurers to expand into new lines of business, which may fall outside their knowledge and expertise. BoE’s specific priorities for this year include:

  • Reviews of underwriting and exposure management for selected lines of business at a number of large London Market insurers, including a review of how changes in terms and conditions are carried through to planning, reserving and capital assessment and a review of the risk management of delegated underwriting.
  • A thematic review across a number of smaller Lloyd’s managing agents, to assess how distribution channels are changing.
  • Reviews of underwriting and risks around pricing at a number of motor insurers and how insurers protect themselves against the risk that under-pricing leads them to take on a large number of policies quickly, particularly through price comparison websites.

The speech also sets out BoE’s priorities in respect of life insurance for the coming year.