London Market insurance companies' 2018 earnings were hit by average disaster losses and low returns, Fitch Ratings Inc. noted in a report Monday.
"Underlying profitability suffered from natural disaster losses, as reflected in Lloyd's London reported a total of 105% in 2018 (2017: 114%)," said the London-based unit in Fitch in a statement.
But some market insurance companies in London, as Beazley PLC and Hiscox Ltd. are able to report insurance gains due to their exposed non-disaster special courses, Fitch said in his London Market Insurance dashboard – 2018 result report.
Insurance companies saw a "significant deterioration" in their investment income in 201
London market insurance companies are heavily exposed to US high interest rates and corporate bonds, so higher US interest rates had a "significant negative impact" on the value of their interest-rate portfolios, says Fitch.
The challenging stock market during the fourth quarter of 2018 also affected the insurance companies' investment income
Brit Ltd. reported a negative investment result with other London market insurance companies that reported small positive returns, according to Fitch.
Despite moderate price improvements, price increases remain below what many market participants had hoped for, even
The cost of doing business on the London market remains high, Fitch says, and spending remains "stubbornly high" with most market insurance companies in London as reports a cost ratio of over 40%.
As a result, Fitch said it retains its negative outlook on the London market, reflecting "continued pressure on insurance guarantee profitability".