OREANDA-NEWS. Fitch Ratings says in a new report that managing exposure to growing periodic payment orders (PPOs) will be a substantial challenge for UK motor insurers, placing greater importance on their asset liability management strategies. Given the extended duration of these liabilities, the proportion of reserves allocated to PPOs will grow, as each year more PPOs are added to insurers' motor books than expire. The extended duration of PPOs presents longevity, inflation and investment risks for motor insurers, which are traditionally issues for life insurers.

Fitch believes that Solvency II (SII) offers assistance to motor insurers looking to manage these risks. The new regime will bring greater consistency to PPO reserving assumptions used across the sector, thus reducing the risk of some insurers materially understating their PPO liabilities. SII disclosure will also provide additional insight into insurers' exposure to PPOs.

The full report, "Motor Insurers Face Growing PPO Risk But Solvency II Offers Assistance in Managing This Challenge", is available on www.fitchratings.com.