AM Best has given the UK non-life insurance market a negative outlook, mainly due to expected Brexit fallout.

The ratings agency says conducting business in the EU post-Brexit is a “pressing concern” for Lloyd’s, the London market and other commercial insurers.

The wider economic impact will affect all UK insurers, with possible negative implications for investment income and claims inflation, plus a reduction in demand for insurance.

“The UK’s impending departure from the European Union is a key driver of AM Best’s negative outlook on the sector, given the economic implications are difficult to predict with any degree of certainty,” AM Best says.

Persistent competitive market conditions add to an overall difficult operating environment and earnings are “likely to be depressed over the medium term”.

On the positive side, capitalisation is generally robust and the sector’s risk management capabilities are strong.

“Companies able to differentiate themselves and build a competitive advantage through more sophisticated use of data and technology will be better placed to navigate this difficult environment,” AM Best says.