Moody's Ratings has changed its outlook for the UK property and casualty insurance sector to stable from negative. The move reflects the impact if rising premiums to absorb claims inflation in personal lines and Moody’s said premium rates in the commercial market were sufficient to support strong insurer performance.

Explaining its decision, the ratings agency stated: “P/C personal lines prices rose by 25% in 2023, according to the Association of British Insurers. Together with moderating claims inflation, this will support underwriting profitability over the next 12-18 months. However, with competitive pressure on prices building up again, profitability may come under renewed strain if claims inflation proves more persistent than expected.

“Commercial lines price growth has slowed or reversed in some segments, but remains supported by indexation in others, and should continue to drive strong results over the medium term. With commercial lines accounting for over 60% of total UK P/C premiums in 2023, this will feed through into strong market-wide combined ratios.”