UK life insurance outlook remains stable as problems persist
Fitch Ratings said its outlook for the UK life insurance sector remains stable as problems persist in spite of strong capitalisation and record new business volumes.But the rating agency said it welcomes the strong new business growth since the UK pension reforms in 2006.
Nonetheless, the ratings agency said it is concerned that this one-off expansion masks high lapse rates that are, in general, not clearly disclosed.
Fitch said for many of the new policies sold, existing policies have been terminated, as policyholders simply switch money from old to new policies.
The UK Financial Services Authority proposed a further shake-up of life insurance distribution in a discussion paper published in June 2007.
This, together with the introduction of US-style variable annuity products, may lead to significant changes for the UK market in 2008 and beyond, the ratings agency said.
On the impact of the volatility in the credit and equity markets in the wake of US sub-prime woes, Fitch said the volatility does not currently appear significant enough to put material pressure on its UK insurance ratings.