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TEXT-S&P: UK life insurers' response to regulatory reform is vital
November 27, 2012 / 2:56 PM / 5 years ago

TEXT-S&P: UK life insurers' response to regulatory reform is vital

Nov 27 - Standard & Poor's Ratings Services today published a report
discussing its view of the ongoing regulatory changes in the U.K. life insurance
market (see "U.K. Life Insurers Face Hard Choices As Low Interest Rates Coincide
With Widespread Regulatory Reform"). In our view, these require a strategic
response from all players, even the market leaders. At the same time, continued
macroeconomic uncertainty serves to constrain the margin for error.

In our view, the insurers in the U.K. life sector that we expect to maintain 
or enhance their credit strength after the regulatory changes will be those 
with a broad distribution and product base that is not reliant on commission. 
In addition, those insurers that have access to the market via a number of 
routes or whose customers have already made the cultural transition to paying 
for advice will likely gain most from the changes under the Retail 
Distribution Review. The insurers that can extract value from auto-enrolment 
will be those that are able to retain and select schemes without weakening 
their profitability and those that can exploit the opportunity to sell a 
broader suite of benefits. Overall, a dip in new life sales appears likely 
over 2013 and 2014 as the market readjusts.

Across the industry, capitalization remains robust and has benefitted from 
significant reductions in risk. Furthermore, we consider the balance sheets of 
the U.K. life sector to be liquid. Most liabilities to which shareholders are 
exposed are long-dated, and illiquid. These liabilities are, in general, 
matched with highly liquid and highly rated bonds.

The report is available to subscribers of RatingsDirect on the Global Credit 
Portal at  If you are not a RatingsDirect 
subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 
or sending an e-mail to Ratings 
information can also be found on Standard & Poor's public Web site by using 
the Ratings search box located in the left column at

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