The S&P outlook for both life and the non-life sector for UK insurers is stable in 2018, with expansion forecast for life insurance, but regulatory risk could pose a challenge to the industry.
The expectation is that economics in the UK will remain in line with historical standards for the most part, thus not impacting the outlook for the sector, unless there’s a “disorderly Brexit.”
Non-life insurance underwriting and technical performance is picking up across most lines, although pricing in home insurance is still barely profitable and commercial property remains unprofitable.
For life insurers, automatic enrolment of staff into company pensions, which was expanded to cover all employers in 2018, and bulk annuity sales are likely to grow, boosting longer-term prospects, although S&P noted the number of life platforms may fall.
Emerging trends in personal lines include the move to direct and online sales that’s been picking up in small and midsize enterprise business.
S&P anticipates that “economic growth will be slower, but that the U.K.’s economic fundamentals will remain reasonably secure. We do not currently anticipate a disorderly Brexit, which would alter our forecasts.”
The stable outlook for UK insurance is underpinned by U.K. insurers’ diversification in business, capital strength, and sophisticated risk management.
The main caveat on the horizon for UK based insurers is regulatory change, as seen in the continuing impact of the Ogden discount rate changes in early 2017, although the U.K. Civil Liabilities Bill could help motor insurers by limiting whiplash costs.
S&P analysts said that “most regulatory changes have the potential to significantly increase costs and exposure to conduct and reputational risk.”
However, no fundamental change to the tax regime is expected in 2018, and the U.K. sector is less exposed to interest rate risk than its European counterparts, according to S&P analysts.











