In its new UK Life Insurance Industry Outlook, Moody’s flags up grave concerns for insurers’ “capitalisation, weakening profitability and substantial exposure to equities, as well as the deteriorating economic environment”.
Moody’s managing director and author of the report Simon Harris says: “The UK life insurance industry continues to maintain a robust capital position, despite the impact of falling equity markets, and the position of the strongest players remains very strong. However, the industry has clearly experienced some deterioration in capital over the past six to 12 months.
“Furthermore, if the economy does enter a relatively prolonged period of slowdown, with an associated depressed equity market, capitalisation levels are unlikely to improve markedly in the short-to-medium term, and further downside risk may remain material.”
In terms of profitability and product risk, Moody’s believes that most UK life groups are under considerable pressure, with these pressures set to continue.
However, Harris points out the industry maintains very strong liquidity and it has improved its asset-liability management techniques.