PRA warns against reserve releases by insurers to sustain earnings

UK insurers should avoid the urge to cut prices due to the increased risks arising from the low interest rate environment, the Prudential Regulation Authority's boss reportedly said.

In prepared remarks for a speech in Dublin, David Rule cautioned that low investment earnings because of low interest rates could no longer act as an offset to poor underwriting.

Rule also warned that insurers would be ill-advised to release reserves from past claims in order to sustain reported earnings.

"I want to stress the critical professional role of actuaries in current soft market conditions, where there may be a greater tension between on the one hand underwriting discipline and appropriate reserving and on the other hand business growth and current-year profits," he said.

Reserve releases were running at their highest level in 30 years, PRA said.

"The PRA is not a price regulator, but we are concerned to see that firms are adequately managing their exposures", he said.