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Europe's top motor insurers continue profitable streak but challenges remain

Europe's highly competitive motor insurance industry has maintained its profitability despite the challenges in this often troublesome line of business, industry-wide figures and comments suggest.

Most of the continent's top motor insurers made an underwriting profit in 2018, reporting combined ratios below the 100% break-even mark, S&P Global Market Intelligence data shows.

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Motor insurance — motor liability and "other motor" — is the largest line of nonlife business in Europe. It made up 21.3% of the nonlife primary insurance premium volume across all European Economic Area countries in 2018, according to figures from the European Insurance and Occupational Pensions Authority, or EIOPA. It has also, in the past, been a source of underwriting losses for the industry.

According to data from pan-European industry trade body Insurance Europe's 2019 report into the motor market, motor insurance suffered a four-year losing streak between 2009 and 2012, returning to underwriting profitability in 2013 with a collective, combined ratio across the industry of 98.5%.

In 2018, the profitability trend in motor insurance continued. Of the top 16 motor insurers in Europe by direct premiums written, identified by S&P Global Market Intelligence, four reported combined ratios higher than 100%, denoting an underwriting loss, in 2018. Munich Re Co. reported the highest combined ratio, of 109%, and Groupama Group was not far behind with a ratio of 108.5%.

But the majority of insurers reported profitable combined ratios, and three companies — Powszechny Zakład Ubezpieczeń SA, Admiral Group PLC and Sampo Oyj — had ratios below 90%. The best performer from an underwriting perspective was the U.K.'s Admiral, with a combined ratio of 70.3%, which was partly the result of having one of the lowest expense ratios among the top 16 companies.

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But 2018 figures for companies across the European Economic Area suggest that motor remains a challenging line of business for insurers. EIOPA's annual European Insurance Overview shows that for the 2018 full year, the liability portion of the motor insurance business was the only business line with a median combined ratio above 100%, although the "other motor" segment's median combined ratio was below 100% for the year.

EIOPA's December 2019 financial stability report showed that as of the second quarter of 2019, the median combined ratios of both motor vehicle liability and "other motor" were below 100%. But the regulator added in the report that "concerns of underpricing and underreserving remain" in the "highly competitive" motor insurance market.