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£10bn black hole at UK life firms

Europe&#39s life insurance sector had a £68bn black hole,with the UK accounting for£27bn at the end of 2002 although this has now been cut to £10bn in the UK, says strategy consultancy firm Mercer Oliver Wyman.

In its forthcoming report, Life at the End of the Tunnel? The Capital Crisis in the European Life Sector, the firm warns that the shortfall will dramatically affect life companies&#39 ability to write some types of new business. It predicts a move towards the investment banking model, with financially strong insurers with global scale becoming the only ones able to offer capital-intensive products such as guarantees.

It says the economic capital techniques for measuring capital under EU directive Solvency II, expected to be implemented in 2007, created a deficit of £68bn at the end of 2002, with £27bn in the UK.

But head of global insurance practice and report author Anthony Stevens says this is now more likely to be £34bn-£41bn due to equity market rises and £10bn in the UK. This is based on firms achieving a BBB rating, which Stevens believes is the minimum nee-ded to be a viable life company.

He says: “The growth prospects for the industry are still extremely good. The restructuring might cause turbulence and uncertainty in the short term but survivors will emerge as stronger businesses.”


Minesweeping the pension proposals

The major worry about the Government&#39s pensions tax proposals, Simplifying the Taxation of Pensions, published in December 2003, is that they might be shelved. Despite the fact that considerable simplification of pensions will result if the proposals are implemented, some organisations and individuals have complained about the number of people who will be affected adversely […]

IFAs to shun Standard for new WP business

IFAs do not plan to advise their clients to transfer out of Standard Life&#39s with-profits fund but will not recommend Standard for new with-profits business, according to a survey for Money Marketing. Four-fifths of the IFAs in an online poll say they will not recommend their clients to transfer out of Standard&#39s with-profits fund while […]

ABI wants action over gender agenda

The ABI is calling on the UK Government to take a stronger stance on proposed unisex rates for annuities ahead of a new EU presidency. ABI head of EU and International affairs Hugh Savill wants British MEPs to lobby harder against the draft gender discrimination directive that could see unisex tariffs imposed on all annuity […]

Higher viewings boosting market

Brokers have seen an upturn in activity in the housing market in January with the number of viewings increasing and pushing up house prices. Mortgageforce chief executive Rob Clifford says January saw a slight increase in the average loan size to around £110,000. He says activity levels are higher than they have ever been in […]


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