U.K. Regulator Defends Rate Hikes
By Lisa S. Howard, London Editor
NU Online News Service, Jan. 31, 9:41 a.m. EST, London?Britain's insurance regulator said yesterday that rate increases are needed to assure the long-term health of insurers and their clients.
Howard Davies, chairman of United Kingdom Financial Services Authority spoke in favor of the hikes while acknowledging that recent sharp increases concern many commercial insurance buyers.
Speaking at the annual lecture held by the Association of Insurance and Risk Managers, the London-based risk management group, Mr. Davies said increases in premium rates will help strengthen the insurance industry's capital base..
"However, given the sizable impact of these rises on the profitability of industrial and commercial customers in particular, the industry will clearly need to be able to satisfy those customers that it is doing what it can to control its own costs," he said.
"My suspicion is that this pressure on costs and the need to show stronger capital backing, may drive further consolidation both domestically and internationally," he said.
Mr. Davies noted that some commercial property premiums have risen by around 50 percent across the board and in many cases have doubled or more than doubled.
"On the domestic front, industry estimates suggest that motor and domestic property premiums may rise this year by somewhere approaching 10 percent," he said.
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