According to the ABI (2003), 806 insurance companies were authorized, either by the UK or by another European Economic Area member to carry on insurance business in the UK in 2002. Of these, 592 could carry on general business only (such as motor, household and commercial insurance), 160 were authorized for long-term business only (such as life insurance and pensions) and 54 were composites (able to do both). Overall, during the last twenty years or so, there has been an increase in the number of general insurance companies and a decrease in the number of life insurance companies and composites. The market shares of the largest life insurance company (CR1), the top five life insurance companies (CR5) and the top ten life insurance companies (CR10), together with the Herfindhal index, in 1993 and 2002. The share of the largest company increased from 10.6% to 11.7% during the ten-year period, while the share of the top five increased from 35.2% to 45.7%, and the top ten from 51.3% to 65.9%. At the same time, the Herfindhal index (defined as the sum of the squared market shares of all firms in the industry) increased from 0.04 to 0.06. If all the firms in the industry were of equal size, this would be equivalent to a fall in the number of firms from 25 to 17, suggesting a significant rise in the degree of concentration in the UK life insurance industry over the last ten years. The concentration ratios (CR1, CR5 and CR10) and Herfindhal indices for the four main categories of general insurance: accident and health, motor, property and third-party liability. It is clear from these figures that the least concentrated general insurance sector in 2002 was the motor market, where the largest company (Royal and Sun Alliance) controlled just 13% of the market, the top ten companies controlled 73.2% and the Herfindhal index in 2002 was 0.07. The most concentrated general insurance sector in 2002 was the accident and health market, where the top company (BUPA) controlled a third of the market, the top ten companies controlled 83.9% and the Herfindhal index was 0.17, equivalent to only six equally sized firms in the industry
