UK motor 2023: a year of dramatic losses, and the firms to watch

Our market-wide analysis of the 2023 UK motor market now covers 30 firms based in the UK and Gibraltar, over 95% of the market's gross written premium. It updates the early findings we published in June.

Key findings

• Premium grew by around 19%, to roughly £20 billion across UK and Gibraltar firms (excluding Lloyd's).
• Combined ratios worsened from 109% in 2022 to 112% in 2023.
• The smaller firms did worse: adding 13 firms raised the market combined ratio from 110% in our early findings to 112%. Their average combined ratio was 139%.
• Capital held up: the aggregate Solvency Ratio rose from 169% to 179%.

Could firms survive a repeat?

With supervisors increasingly interested in whether insurers' business models are viable, we introduced a simple resilience measure, the 2023 Loss Impact Indicator. It divides a firm's 2023 UK motor underwriting loss by its excess financial resources at the year end. Above 100%, a repeat of 2023's results in 2024 would, on its own, take the firm below its Solvency Capital Requirement.

It is a deliberately simple heuristic. It ignores other income, other lines of business, investment returns, reserve movements and capital held elsewhere in a group. But it does reveal three distinct groups:

• Secure Majors: the larger firms, typically writing well over £1 billion. Only LV= and DLG were at or above 50%.
• Niche Performers: smaller firms that made an underwriting profit or only a small loss, with a robust buffer.
• Firms to Watch? smaller firms whose 2023 losses were similar to or larger than their excess resources. Some have already made significant changes to their businesses.

Concluding observations

2023 was a year of dramatic losses. Many firms will be hoping that rapidly rising rates and a calmer inflation outlook bring much rosier results in 2024.

We believe the appetite of capital providers to sustain, and of regulators to accept, further underwriting losses may be at its limit. Weaker firms should use any breathing space a hardening market offers to settle their strategy for the next cycle, and to decide where investment in systems and processes will pay back most.