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IMF warns of life office consolidation

The UK life industry could be heading for “largescale consolidation in the coming years”, according to a report published this week by the International Monetary Fund.

The Washington-based IMF says the insurance industry is under considerable stress and while this is not a UK-exclusive problem, it has been exacerbated in the UK because of falling markets and stringent regulatory controls on product design.

The IMF says small to medium-sized life offices have been hit hardest but that bigger firms could suffer if the markets remain depressed.

The report, which is called, United Kingdom Financial System Stability Assessment, takes a wide-ranging look at all aspects of the UK financial system following on from 18 months of research into the UK system by the international body.

It says: “A number of life insurers have been raising further capital, either from the markets or for their parents.

“Nevertheless, the life insurance industry, in particular, could be headed for large-scale consolidation in the coming years.”

KMPG head of UK insurance Richard Bennison says: “There are a lot of pressures which will either lead to a lot of life companies closing to new business or looking to sell off their books.”

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