UK with-profits life insurers have weathered the economic crisis —– but their surplus assets fell by over £10 billion in 2008.
Life insurers suffered from the falls in share prices and long-term interest rates in 2008. Nevertheless, a survey by the Centre for Risk and Insurance Studies, at Nottingham University Business School, shows that each of the top 20 with-profits life insurers had assets at least equal to their liabilities.
However, their assets fell by £47 billion (12.8 per cent) while their liabilities fell by only £36.7 billion (10.8 per cent).
Chris O'Brien, Director of the Centre for Risk and Insurance Studies, said: "These companies are important for people's savings, the assets of the funds totalling £319 billion at the end of 2008. They have been able to survive in the crisis with the help of improved risk management."
Using the 'realistic balance sheets' that life insurers produce in accordance with the rules of the Financial Services Authority (FSA), the survey calculates the average surplus assets ratio fell from 7.8 per cent in 2007 to 5.3 per cent in 2008. However, three firms were able to increase their ratio, while in two firms the ratio more than halved.
The full survey can be read at: http://www.nottingham.ac.uk/business/cris/With-profits.html
The Centre for Risk and Insurance Studies surveyed the top 20 with-profits life insurers, using the 'realistic balance sheets' they produce in accordance with the rules of the Financial Services Authority (FSA). The figures as at the end of 2008 were compared with those companies' data at the end of 2007.
The information is from companies' annual returns to the FSA, and is shown in three tables for each of 2007 and 2008 (see link above to the Centre for Risk and Insurance website).
Chris O'Brien said: "Banks have been in the spotlight in the global economic crisis. We do not expect life insurers to suffer in the same way as they have a different business model.
"However, they are exposed to financial conditions that have included low interest rates, a fall in share prices and widening spreads on corporate bonds. The financial position of life insurers is therefore of particular interest."
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More information is available from Chris O'Brien, Director, Centre for Risk and Insurance Studies, Nottingham University Business School, on +44 (0)115 846 6519, Christopher.O'brien@nottingham.ac.uk or Tim Utton - Deputy Director of Communications on +44 (0)115 8468092, tim.utton@nottingham.ac.uk