The outlook on the UK life insurance market is ‘staying stable’, according to credit rating agency AM Best in a new report.
In “Market Segment Outlook: United Kingdom Life Insurance”, AM Best cites a number of factors supporting its stable outlook, including a strong pipeline for pension risk transfers, as higher interest rates have improved the funding ratio of defined benefit schemes.
The report also suggests the improved interest rate environment will likely support investment yields. At the same time, investment opportunities are likely to broaden after prudential regulatory changes, notably the revision of the matching adjustment framework.
A factor that moderates AM Best’s stable outlook is the increasing use of funded reinsurance, which may lead to increased credit risk and concentration risk with exposures to reinsurers that sit outside of the UK regulatory space and can operate highly concentrated business models or take on elevated investment risk.
