Strengthening Capital Resilience in the UK and Gibraltar Insurance Markets

Over the past three years, both the UK and Gibraltar insurance sectors have shown remarkable resilience by reinforcing their capital strength amidst a challenging operational landscape. This article discusses the surge in solvency coverage, reinsurance dynamics, premium growth, and improved underwriting performance in both markets.

A Landscape of Recovery: Solvency Coverage Gains

The insurance markets in the UK and Gibraltar have been strategically improving their solvency ratios, indicating a positive shift towards financial stability. Analysis from Insurance DataLab reveals that UK insurers recorded an impressive aggregate solvency coverage ratio of 178.4% in 2022/23, increasing to 188.7% by 2024/25—marking the best performance since the inception of these analyses.

Key Statistics:

• Eligible Own Funds (UK): Increased from £36.8 billion to £38.1 billion, before slightly easing to £35.3 billion.
• Aggregate Solvency Capital Requirement (SCR): Decreased from £20.6 billion to £18.7 billion.

In Gibraltar, the situation mirrors this progress as insurers lifted their aggregate solvency coverage from 140.0% in 2022/23 to 165.3% in 2024/25. During the same period, eligible own funds grew significantly from £1.9 billion to £2.8 billion, despite a slight increase in SCR from £1.4 billion to £1.7 billion.

Broader Strengthening: Coverage Ratios on the Rise

Both markets have benefited from a more nuanced perspective on capital adequacy. For the 2024/25 period, the aggregate coverage relative to the Minimum Capital Requirement (MCR) also showed improvement, underscoring the vigor of their capital positions.

MCR Coverage Statistics:

• UK Insurers: Improved from 481.5% in 2022/23 to 499.8% in 2024/25, with eligible own funds of £33.0 billion against an aggregate MCR of £6.6 billion.
• Gibraltarian Insurers: Enhanced from 367.9% to 435.3%, as their eligible own funds increased from £1.7 billion to £2.6 billion.

This enhancement in capital strength is crucial, especially given the unpredictability of global markets.

Evolving Reinsurance Dynamics

Historically, Gibraltar’s insurance market has leaned heavily on reinsurance, but recent data suggests a shift towards greater risk retention. In the last three years, Gibraltar-regulated insurers decreased their reliance on reinsurance from 69% of gross earned premiums in 2022/23 to just 40% in 2024/25. This trend coincides with increases in capital reserves among local insurers.

Conversely, UK insurers maintained a steady reinsurance ratio, ceding between 36% and 39% of their premiums.

Premium Growth and Underwriting Performance

Both markets have also observed robust premium growth, with the UK aggregate gross written premium rising from £44.6 billion in 2022/23 to £55.8 billion in 2024/25, while Gibraltar’s premiums increased from £6.7 billion to £9.8 billion.

Moreover, the underwriting performance signals a resurgence in profitability. By 2024/25, the UK’s combined operating ratio (COR) improved from 102.2% to 94.5%, marking the first year that the UK outperformed Gibraltar in profitability, as Gibraltar’s COR moved from 100.4% to 95.0%.

Key Factors Contributing to Profitability:

• Improved Underwriting Discipline
• Stabilizing Claims Trends

In the UK, gross claims incurred rose from £30.7 billion to £31.4 billion, while Gibraltar experienced an increase from £5.1 billion to £6.3 billion.

Conclusion: A Stabilized Future Ahead

As the UK and Gibraltarian insurance markets prepare for their next operational cycles, the investment in capital strength and the shift in risk dynamics signal greater resilience amid uncertainty. While the nuances of reinsurance and regulatory demands vary between the two jurisdictions, the overarching trend is evident: both markets are gearing up for potential future shocks with fortified financial standings.

Key Takeaway

To maintain long-term stability and sustainability, insurance providers in both regions must balance capital strength with continued performance in underwriting. This equilibrium will be crucial as they navigate the complexities of an ever-evolving global landscape.

By strengthening their foundations today, both the UK and Gibraltar can ensure they remain robust players in the insurance market of tomorrow.