Regulation main 2018 challenge for UK insurers
Regulation will be the main test for UK insurers in 2018, according to S&P Global Ratings.
The continuing impact of the Ogden discount rate changes in early 2017 shows how sensitive to regulatory change the sector can be, according to a Jan. 29 S&P press release. Although the UK Civil Liabilities Bill could help motor insurers by limiting whiplash costs, most regulatory changes have the potential to significantly increase costs and exposure to conduct and reputational risk, according to the statement.
Non-life technical performance is improving across most lines, although pricing in home insurance is still barely profitable and commercial property remains unprofitable. Trends previously seen only in personal lines, such as the move to direct and online sales, are gathering pace in small and midsize enterprise business.
In the longer term, S&P expects to see the market for life insurance expanding, not least because of the automatic enrollment of staff into company pensions, which was expanded to cover all employers in 2018. The UK sector is less exposed to interest rate risk than its European counterparts. Although individual annuity sales are falling, bulk annuity sales are likely to grow, despite the fact that the number of life platforms in the UK may shrink. No fundamental change to the tax regime is expected in 2018.
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