Motor reinsurance capacity to be reduced

Posted :03-12-2004

The UK's motor insurance market is set for a transformation in two years' time, when a reduction in capacity for unlimited reinsurance on third-party claims comes into force.

Many in the industry are worried that some smaller motor insurers will withdraw from the market for want of unlimited cover from companies such as Swiss Re, which has confirmed plans to stop offering unlimited cover for these claims.

However, the Association of British Insurers (ABI) is continuing to hold discussions with the Treasury, the Department of Transport and the Financial Services Authority into the possibility of developing low-risk mitigation strategies.

If these talks prove successful, the ABI hopes that the unlimited third party liability function will be able to continue.

A spokesperson commented: "We have no fears that the market will be able to cope."

The main problem with the new regulations, to come into force in 2007, is that under the Road Traffic Act, UK motor insurers have to provide unlimited third party liability cover to all motorists.
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