UK Commercial Property Insurance: Market Dynamics & Opportunities 2019

UK Commercial Property Insurance: Market Dynamics & Opportunities 2019



The commercial property insurance market saw stable gross written premiums (GWP) growth again in 2018. The market remains competitive, with the leading players retaining similar shares year on year. This keeps premium rates at stubbornly low levels. Profitability remains significantly affected by weather conditions, and a sharp rise in claims at the beginning of 2018 forced a competitive market to harden rates, resulting in the worst profitability results in 12 years. Besides weather, the other key factor affecting the market is Brexit, which insurers also have no control over. In the long term we expect growth in GWP up until 2024, with growth rates improving after 2020 when the UK’s Brexit position should be clearer.

This report provides in-depth analysis of the UK commercial property insurance market. Among the points discussed include the size of the market and performance ratios, as well as changes in premiums, claims, incidents, regulations, and opportunities. The report provides a thorough overview of the market along with future forecasts.

Scope

- In 2018 the commercial property market grew by 4.1% to £5.6bn in GWP, with a five-year compound annual growth rate of 3.2%.
- Underwriting profitability fell to a 10-year low in 2018 as insurers recorded a loss of £317m.
- All new construction work saw a slight rise in 2018, although growth slowed significantly from 2017. In addition, new orders declined for the second year running due to Brexit uncertainty.
- Aviva continues to lead the market, after growing its market share in 2019 to 16.9%. AXA overtook Zurich to capture second place, with Allianz and RSA making up the rest of the top five.

Reasons to buy

- Benchmark yourself against the rest of the market.
- Ensure you remain competitive as new innovations and significant market developments occur.
- Be prepared for how the commercial property sector could be affected following the UK’s decision to leave the EU.
 

1. EXECUTIVE SUMMARY
1.1. The competitive commercial property insurance market continues to grow steadily
1.2. Key findings
1.3. Critical success factors
2. MARKET DYNAMICS
2.1. Introduction
2.2. The commercial property market recorded steady GWP growth
2.2.1. GWP increased by 4.1% in 2018 as the market reached £5.6bn
2.2.2. Insurers saw the worst underwriting performance in 12 years due to weather incidents
2.2.3. Market COR soared in 2018, exceeding 100% for the first time since 2015
3. MARKET OPPORTUNITIES
3.1. Total UK construction growth slowed significantly in 2018
3.1.1. New construction rose in 2018 for the fourth consecutive year
3.2. Investment in the capital looks set to continue despite Brexit
3.3. Rents are rising slowly across commercial sectors
3.3.1. Commercial property occupiers prefer renting to ownership
3.3.2. Commercial rents are consistently growing
3.4. An increasing population and vacant property rates could prove detrimental to the commercial sector
3.4.1. WeWork shows signs of struggling
3.5. Regulation has dampened consumers’ interest in commercial property investment
4. COMPETITOR DYNAMICS
4.1. The top five insurers dominate the market
4.1.1. Aviva expects a slowdown in the commercial property market following Brexit
4.1.2. AXA turned to AI bots to increase efficiency and updated its AXA Commercial app
4.2. Technology and preventative measures are emerging
4.2.1. Cytora continues to raise significant sums of money as it looks to digitalize the sector
4.2.2. RSA is targeting prevention with the relaunch of the RSAred database
4.2.3. FloodFlash aims to offer fairer cover to businesses in flood risk areas
5. THE MARKET GOING FORWARD
5.1. The commercial property insurance sector will top £6.7bn by 2024
5.2. Brexit will have a significant impact on the industry
5.2.1. A lack of skilled workers and economic uncertainty will hurt the construction industry in the immediate aftermath of Brexit
5.3. Technology and the sharing economy are reshaping elements of the market
5.3.1. Airbnb and on-demand policies are disrupting the commercial property space
5.3.2. Data from drones could become key in assessing risk and damage
6. APPENDIX
6.1. Abbreviations and acronyms
6.2. Methodology
6.2.1. UK Top 20 General Insurance Competitor Analytics methodology
6.2.2. Forecasting methodology
6.2.3. 2019 UK Life & Pensions Survey
6.2.4. 2019 Global Wealth Managers Survey
6.3. Secondary sources
6.4. Further reading
 

List Of Tables

Table 1: UK commercial property insurance GWP, 2013-18
Table 2: UK commercial property underwriting results, 2009-18
Table 3: UK commercial property insurance market claims ratio, expenses ratio, and COR, 2013-18
Table 4: UK commercial property gross claims incurred (£m), 2014-18
Table 5: UK commercial property number of claims notified (000s), 2014-18
Table 6: Construction output, non-seasonally adjusted, current prices by sector (£000s), 2014-18
Table 7: Construction output, non-seasonally adjusted, current prices by sector, year-on-year growth rates, 2015-18
Table 8: Proportion of residential and commercial property rented in the UK, 2004-17
Table 9: The cost of prime industrial rents in selected cities in the UK (euros per sq. meter), 2017-19
Table 10: Population estimate summary for the UK, 2005-18
Table 11: Market shares by GWP for the top 10 players in the commercial property market, 2016-18
Table 12: GWP for the top 10 players in the commercial property market (£m), 2016-18
 

List Of Figures

Figure 1: Commercial property insurance saw steady growth in 2018
Figure 2: Commercial property insurance has seen great variation in underwriting performance
Figure 3: The claims and expenses ratios rose in 2018
Figure 4: Claims returned towards 2016 levels after reductions in 2017
Figure 5: The number of claims also rose in 2018 as insurers struggled to curtail costs
Figure 6: UK construction growth slumped in 2018
Figure 7: New housing continued to grow in 2018, but other work dropped off
Figure 8: London continues to plan and execute a significant number of construction projects
Figure 9: Commercial and leisure sector construction is thriving in London
Figure 10: Commercial property remains larger than residential
Figure 11: Prime commercial rents continue to see steady quarterly increases
Figure 12: Industrial rent around London is by far the highest across the UK
Figure 13: The UK population has risen by just under 10% since 2005
Figure 14: The number of buy-to-let mortgages has been stagnant since the 2016 decline
Figure 15: AXA and Aviva improved their market shares in 2018
Figure 16: AXA looks to connect with commercial customers by providing relevant information
Figure 17: Commercial property insurance will grow to over £6.7bn by 2024
Figure 18: Forecasting methodology
 

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