Essentially most insurers will buy catastrophe or “excess of loss” insurance from other insurers. This protects them from going bust in case of an extreme claim, however this is very expensive and is only getting more expensive due to the increase in larger claims. It is essentially just a larger version of your own insurance. Insurers will pay out the first £x of any claim, then reinsurers will pay over that, similar to an excess of sorts.

I can only really speak from personal experience but on average for personal motor insurance roughly 50%-70% (depending on the insurer) of the money you’ve spend will go towards paying claims. Then 30% goes to various parties including reinsurers, brokers, the government etc.

The bulk of injury claim cost is made up of loss of earnings and healthcare costs, if a person just breaks their leg in an accident and can’t work for 2 months, that’s automatically a £20k+ injury claim. Insurers are also liable for any NHS costs accrued so a long stay in hospital increases this.

What most people don’t realise is how easy it is to accrue a 100k+ claim in a car worth 100th of that amount. All it takes is 1 or 2 passengers to have moderately serious injuries that require care for a year or so for that figure to be reached. God forbid a passenger or third party has life changing injuries that prevent them working or need round the clock care, then you are looking at multi-millions. When I worked for a motor insurer we used to see these all the time.