A new report suggests certain motor insurers outperform their rivals by some distance despite the competitive nature of the market

Solvency II data suggest Acromas, Sabre and Admiral were the three best performers in the UK motor insurance market in the five years to 2020, outperforming their peers by some distance; seemingly leveraging specific but different competitive advantages respectively in a crowded market.

That is according to research from Litmus Analysis, a consultancy that provides ratings advice and analytical services to the insurance and reinsurance industries. The firm has conducted  a comprehensive review of the results of 26 UK & Gibraltar domiciled motor insurers in the five-year period using Solvency II data from AM Best*.

Litmus developed a UK Market Motor cohort of insurers to review carrier specific underwriting performance covering around 98% of UK motor GWP. One key focus was gross underwriting performance as this gives a fundamental perspective on the quality and volatility of an insurer’s book. This data had not been publicly available historically, but since 2016 has been required to be published under SII regulations.

Despite operating in such a crowded and competitive market, three players stood out from the crowd by some distance. Acromas and Sabre both posted a gross underwriting performance almost 20 percentage points better than the median of the cohort while Admiral (Gibraltar), Admiral’s largest carrier, excelled in its net underwriting performance, posting a result some 36 percentage points better than the median of its peers.

Acromas and Sabre posted an average gross loss ratio (GLR) over five years of 52.5% and 53.3% respectively. The cohort as a whole posted a median performance of 72.7% in the same period.

Both carriers have also proven to be very effective users of the motor reinsurance markets. Sabre’s 5-year net loss ratio (NLR) was an exceptional 45% despite a quite modest reinsurance spend. Acromas’ net ratio was minus (yes, minus)28%. On this net basis Admiral’s major, Gibraltar-based, carrier also delivered a stand-out result with a 5-yr. NLR of 33%. The median result for the cohort was 69%.

Acromas is owned by Saga, the specialist in delivering travel and personal finance products to people over 50. The demographic of this group and the deep connections the company has to its customers may explain its exceptional underwriting performance.

Sabre is a specialist motor insurer that, through various brands including Insure 2 Drive and Go Girl, targets higher-than-average premiums using data and sophisticated risk selection to deliver its market-beating underwriting performance.

Admiral (Gibraltar), the biggest of the standout performers by some distance, appears to be bolstered in its performance by a good relationship with its reinsurers. It shares 40% of its UK insurance risks with Great Lakes, a subsidiary of Munich Re.

Stuart Shipperlee, Managing Director, Litmus Analysis, said: “The data generated here will be fascinating to many in the market because it throws up several surprises around how the performance of insurers can vary dramatically in what many might have assumed was a relatively homogenous market.

“The type of gross loss ratios delivered here by Acromas and Sabre are not unheard of among small, niche players, but they become very challenging to deliver with greater premium volume as the opportunities to risk select to this apparent degree reduce. However, both carriers had gross written motor premiums in 2020 north of €180 million and so are achieved this at some reasonably significant business scale.

“Conversely, the underwriting opportunities that can come from smaller books even within larger insurance groups are highlighted by two UK motor books too small to make our cohort (below €50 million GWP)**. Motors Insurance delivered a 5-yr. GLR of 39.4% (€10 m of 2020 motor GWP) while Hiscox’s UK carrier came in with a 48% GLR average (€24 m of 2020 motor GWP).

 “The impact of reinsurance usage tells an interesting story. Comparing UK Insurance (third place in the 5-yr. GLR table but fifth on the NLR basis) with Admiral Gibraltar (by far the larger of the two Admiral carriers in our cohort) highlights the potential impact of reinsurance. UK Insurance gives up a couple of points in its 5-yr. NLR vs the GLR (as would be what one would commonly expect economically – assuming it is paying to reduce volatility). But Admiral Gibraltar gains a whopping 31%, reducing a 64% 5-yr. GLR to an NLR of 33%.

“Acromas and Admiral Gibraltar both cede a lot of their book (retention percentages in the mid-20s). In essence they are very substantially using their reinsurers’ capital to write the gross volumes that they do.

“Sabre, by contrast, retains over 90% of gross premium. We presume its protection buying focus is in handling the potential volatility from catastrophe losses and liability exposures”.

“The ceded loss ratios (CLRs) describe the underwriting result a carrier’s reinsurer(s) are, in the aggregate, achieving. The closer the CLR is to the GLR and the lower the cedant’s retention rate, the more the cedant/reinsurer relationship appears to reflect the sharing of loss frequency. Higher differences and retentions suggest the cedant is primarily buying protection against loss severity.”

To see this report with the accompanying tables visit: XXXX. To discuss either the report or Litmus’ underlying please use the email address below.

Stuart Shipperlee

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