British general insurers are under pressure in a competitive market, according to an AM Best analysis.

While the market was well capitalised last year, unfavourable claims trends and falling premium rates affected profits, the ratings agency says.

Premium rates in property lines fell despite rising claims costs, causing the accident-year loss ratio to deteriorate to 56.4% from 50.4%. Weather-related losses increased on the previous year, and the cost of claims from incidents such as burst water pipes remained high.

AM Best warns UK insurers’ results this year will be affected by storm losses.

The Financial Conduct Authority plans to investigate how insurers charge customers for home and motor, amid concerns some longstanding policyholders are charged more than new customers.

This is likely to put further pressure on pricing models and strategies, AM Best says.

Any savings from the Government’s proposed changes to the personal injury compensation system will be quickly passed to insureds due to competitive pressures, it says.

Yet the claims environment will remain challenging due to persistent fraud problems, higher repair costs and a growing compensation culture.

Investments will provide little support to earnings, due to low interest rates.

AM Best’s analysis focuses on the 100 largest insurers, which reported an underwriting loss last year, due in part to natural disasters. The loss was lower than in 2016.