Analysts warn of further hit to UK property insurance market in 2023

The specialists noted that retail property claims in the third quarter of last year had already reached £702m after rising by 33%.

The firm cited figures from the Association of British Insurers, which showed commercial property claims increased by 8% to £542m compared to Q2 2022.

Shabbir Ansari, senior insurance analyst at Globaldata assessed that subsidence is one of the major areas of claims for retail property.

He commented: “Claims related to this category grew by 394.5% in Q3 2022 against the same period in 2021. Claims related to subsidence stood at £115m in Q3 2022, which is the highest it’s been since Q3 2006. This was followed by water escape, which increased by 24.3% for the same period.”

Last summer, LV released figures showing that subsidence cases were up by 209% between June and July and warned of more increases.

Furthermore, Ansari said that the house rebuilding cost index published by the ABI registered a double digit increase and stood at 19.4% in December 2022.

He stated: “This, along with increased the frequency of weather-related incidents, will lead to an increase in property insurance premium rates and negatively impact the profitability of UK property insurers in 2023.”

Direct Line

Last week Direct Line issued a profits warning that knocked nearly 25% off the value of its share price.

Among the factors behind the warning were the ‘freeze event’ from January 2022 and subsidence related claims over the summer nearly doubling Direct Line’s weather claims to in the region of £140m for the year, well above its expectation of £73m.

Ansari suggested that extreme weather conditions have likely cost UK insurers around £1.5bn in 2022 as he warned a current flood alert in place “is expected to further increase claims, which will have a negative impact on the profitability of insurers”.

All of which comes on top of consultants EY having already predicted in November that the market’s net combined ratio for home insurance in 2022 will be 116% – the worst result for 15 years. This is expected to improve in 2023 but stay in the red at 109%.

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