Fitch Ratings’ Outlook for UK Life Insurance in 2023

Neutral Sector Outlook Fitch Ratings’ sector outlook for the UK life insurance market is ‘neutral’ relative to actual fundamentals in 2022.

This outlook is driven by strong sector fundamentals, offset by macroeconomic deterioration and financial market volatility.

Fitch is maintaining Stable rating Outlooks for most UK life insurers, indicating that most ratings are likely to be affirmed in the next two years.

This reflects insurers’ strong capitalisation, resilient operating profitability and very strong business profiles.

What to Watch Pension De-Risking Keeps Growing Fitch expects pension de-risking volumes to remain strong in 2023, underpinned by strong structural demand from corporates de-risking their balance sheets.

This trend is supported by better pension de-risking affordability, because pension schemes have higher funding levels and insurers can offer improved pricing due to higher interest rates and credit spreads.

Strong Demand for Workplace Savings We expect UK asset and wealth managers operating in a workplace retirement segment to benefit from resilient inflows in 2023, supported by fiscal incentives and the UK’s auto-enrolment regime.

In particular, inflows are likely to track salary inflation, but would suffer if the workforce reduces.

Retail Savings Market to Slow Fitch expects assets under administration in retail savings and wealth businesses to remain under pressure due to weaker net flows and volatile financial markets.

Retail savings business inflows are likely to be lower in 2023 due to reduced consumers’ disposable income and elevated savers’ risk aversion.

by Nataly Kramer