Growth is expected in the UK property and casualty market as the UK economic environment improves, said Moody’s in a new report on the sector.
Rising general economic activity is likely to benefit both personal and commercial P&C lines, which are often influenced by economic trends, said the ratings agency.
But Moody’s also noted that with interest rates likely remaining low compared with historical average levels, insurers earnings will continue to be curtailed.
Notwithstanding a 3% drop in top-lines during 2013, the industry's underwriting performance improved, owing to insurers' restructuring, cost-cutting and claims efficiency programs.
"Although tough pricing conditions and declining reserve releases will exert pressure on underwriting profitability, insurers will likely pursue further cost reductions and enhance their underwriting capabilities to maintain profitability over the next 12 to 18 months," said Moody’s associate analyst Helena Pavicic Helena.
"Greater regulatory scrutiny is the new norm, especially in personal lines, but is manageable for the industry," added Pavicic.
Clarity around the structure and implementation date of Solvency II is a positive development for the industry as it secures a stable and credit-supportive regulatory environment.