Andrew Torrance, the Chief Executive Office of Allianz, discussed today (20th May 2013) the results of their first quarter but added that, said liability insurance remains a real challenge as the insurance market is used to running (public and employers’) liability books at a combined operating ratio in excess of 100% and relying instead on investment to make up for underwriting losses. Effectively, historically insurance companies do not make any money from the products themselves but from the premiums they bring in that they reinvest.

As reported in Post today, Mr Torrance was quoted as saying “In this new interest rate environment, which I don’t believe will end any time prior to 2016, the market needs to get to grips with the idea that you have to be able to show underwriting profits on that [liability] line as well if you’re going to make a reasonable return on capital. Allianz has cut back its exposure on its “problematic” liability account, in which GWP (Gross Written Premiums- the premiums paid by policyholders) was down by 2.5% after registering rate rises between 8% and 9%. We see liability rates as being too low in the market, given the exposures and the claims inflation levels that are out there,” he said. Customers should still capitalise and take advantage of cheap public liability insurance.

Also reported was the (commercial) motor book of Allianz which apparently grew by 13% in Q1, despite the insurer registering a rate rise of 6.0% after. Andrew Torrance said he would like to keep growing in commercial motor following the same strategy that he claims has delivered the positive Q1 results: “We’ll deploy capital where we see opportunities for growth and take capital out of areas where there isn’t a profit opportunity.” So cheap fleet insurance still has an appetite with insurers where there is good risk management.

Mr Torrance also commented on the recent changes introduced by the Legal Aid, Sentencing and Punishment of Offenders Act and said any benefits are unlikely to emerge until 2014 adding that the changes will facilitate lower premiums, which can be passed onto consumers for a range of policies including cheap minicab insurance.

He did criticise, however, the introduction of damaged-based agreements, by which solicitors are allowed to keep a pre-agreed percentage of the damages won in court if a claim is successful. “DBAs could potentially provide a funding source for spurious claims and it is a pity these changes have been introduced at this time. I wouldn’t be favour of that and neither would Allianz. Looking at it optimistically there can be a good outcome for policyholders, equally there is a chance the claims farming industry might reinvent itself,” he said.