Reinsurance News

Strong growth for UK group life market: Swiss Re

12th April 2017 - Author: Luke Gallin

The latest Group Watch report from reinsurance giant Swiss Re shows solid growth in the UK group life market, with 520,000 newly covered members in 2016, taking the number of people covered by Group life schemes to beyond 12 million.

“This year’s results paint a very positive picture at a difficult time for the UK economy,” said Ron Wheatcroft, Technical Manager at Swiss Re, and author of the reinsurer’s Group Watch 2017 report.

An additional 520,000 covered members represents growth of 4.5% when compared with the previous year, and Swiss Re underlines opportunity for further growth in the market with the assistance of the UK government.

The growth in the UK group life market in 2016 could result in an increased demand for reinsurance protection, as life insurers might look to increase capital levels to meet requirements and regulatory needs, and also look to offload some of the risk to the willing and able life reinsurance sector.

Looking closer at the figures and Swiss Re reveals that in-force death benefit sums assured grew by 4.4% in 2016, with excepted group life benefits recording annual growth of almost 30% in the year. At the same time, in-force death in service pension benefits declined by 6.8% in 2016, as employers maintained the trend of withdrawing coverage in order to provide lump sum cover only.

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“The stand-out figures in the data show the increase in Excepted Group Life cover and there are other good signals too, including a reverse in the decline of long-term disability income in-force policies. This is particularly relevant with the spotlight in the DWP and DH Green Paper published late last year on the potential for growth,” continued Wheatcroft.

For the first time in over a decade Swiss Re analysis shows that in 2016 long-term disability in-force policies increased, from 17,111 to 17,168.

Critical illness policies also performed well in 2016, says Swiss Re, with in-force sums assured increasing by 9% and premiums up by 11.5%.

Despite the positive headline numbers Swiss Re does highlight some areas where the UK government could help to stimulate further growth in the UK group life market, which again, could stimulate reinsurance demand.

“The growth in Excepted Group Life policies reaffirms the need for clarity across the whole market around these arrangements. An exemption, where the EGLP is the sole asset, would confirm these arrangements as an efficient and effective way for employers to provide life cover as the link between pension provision and death benefits becomes less direct,” continued Wheatcroft.

The Swiss Re report suggests that the UK government should reconsider its choice not to permit an exemption from “new salary sacrifice restrictions affecting Excepted Group Life and Long-Term Disability Income policies,” stating that this would “encourage wider participation and remove the disincentive that employees suffer double taxation if they contribute towards their employer’s Long-Term Disability Income policy.”

Furthermore, the report calls for the government in the UK to “exempt from taxation discretionary trusts where the sole trust asset is an Excepted Group Life policy.”

Swiss Re launched its Life Capital unit in January 2016 through which the reinsurer assumes life risk. The firm’s Life Capital unit and subsequent involvement in the marketplace likely gives the company a solid view of what’s happening in certain group life markets, enabling it to predict further growth for the UK group life sector.

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