UK motor 2023: heavier losses, and what IFRS 17 did to the numbers

UK motor insurers continued to make heavy underwriting losses in 2023, performing even worse than in loss-making 2022. Competitive, legal, regulatory and economic headwinds have put firms under intense pressure.

Our early findings are based on the regulatory disclosures of 17 leading firms, together over 80% of the UK motor market by gross written premium.

Key findings

• Premium grew by around 19%.
• Combined ratios rose from 107% to 110%.
• Capital remained strong: the aggregate Solvency Ratio for the sample rose from 168% to 179%.
• Market changes: RSA completed its exit from personal lines motor, and Covea's results were affected by a loss portfolio transfer within its group.

The IFRS 17 effect

2023 is the first year insurers reported under IFRS 17 instead of IFRS 4, with a material effect on disclosed net premium and combined ratios, most notably for Admiral and Hastings.

Admiral's reported motor combined ratio rose from 85% to 95%, while net earned premium increased by 220%. But Admiral also restated its 2022 figures on a consistent basis, turning 85% into 100%. Seen that way, its 2023 results improved. Hastings' net earned premium rose by 107%, with a small increase in combined ratio from 98% to 103%.

For both groups, the jump in net premium appears to come mainly from how quota share reinsurance is treated under IFRS 17. All else equal, this dampens movements in the combined ratio away from 100%: if net premium doubles, a 90% combined ratio becomes 95%, and 110% becomes 105%.

Size and performance

Apart from the three largest underwriters (Admiral Gibraltar, Direct Line and Aviva, which all saw marked increases in combined ratio), there was no strong link between a firm's size and the change in its results. NFUM, the only mutual in the sample, kept the highest solvency ratio.

We will update this analysis later in 2024 with more firms, particularly from Gibraltar, which writes around 30% of the UK motor market.