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Market Guide: Life Insurance and Pensions in the UK 2006

Published by: Datamonitor

Published: Apr. 17, 2007 - 29 Pages


Table of Contents


Overview

Catalyst

Summary

Executive Summary

Despite marginal increases in premiums in the last five years, between 2006 and 2010, the UK life and pensions market is set to grow at a compound annual rate of 4.7%, driven primarily by growth in pensions The size of the UK life and pensions market increased marginally between 2001 and 2005 Increased investment in pensions will produce higher growth rates in the next five years The market is being shaped by EU legislation as well as government intervention to simplify the pensions regulatory framework The market is dominated by UK-incorporated firms, by number, and by the top five insurance groups, by premium income Among the market leaders, banking and insurance groups alike rely on distribution through bank networks and financial advisors Table of Contents Overview Catalyst Summary

Executive Summary

Despite marginal increases in premiums in the last five years, between 2006 and 2010, the UK life and pensions market is set to grow at a compound annual rate of 4.7%, driven primarily by growth in pensions.
MARKET OVERVIEW

The size of the UK life and pensions market increased marginally between 2001 and 2005 Premium income in the UK life and pensions market is almost evenly split between life insurance and pensions The proportional distribution of premium income between group and individual policies has been largely consistent between 2001 and 2005 Following a decline in 2003, premium income from non unit-linked insurance increased again in 2004 and 2005 Equities consistently account for the single highest proportion of the investment assets of life and pensions insurance companies

MARKET FORECASTS

Increased investment in pensions will produce higher growth rates in the next five years Over the next 5 years, premium income in the life and pensions market is set to grow at a compound annual rate of 4.7%, compared to 0.2% growth between 2001 and 2005

MARKET REGULATION

The market is being shaped by EU legislation as well as government intervention to simplify the pensions regulatory framework The Financial Services Authority regulates the UK life and pensions sector Insurance companies which belong to financial conglomerates face additional supervisory requirements The Individual Capital Adequacy Standards allow firms greater flexibility in risk management The Insurance Mediation Directive creates a single passport for insurance intermediaries and enhances consumer choice The IORP directive creates new market opportunities A-day reforms have fostered growth and intensified competition in the pensions market Further regulatory changes are anticipated for the UK pensions industry Proposed anti-money laundering legislation implies an additional administrative burden for insurance companies and brokers Upcoming laws will enhance consumer protection EU proposals will address consolidation in the financial services sector

COMPETITIVE MARKET STRUCTURE

The market is dominated by UK-incorporated firms, by number and by the top five insurance groups, by premium income 42% of all life and pensions providers are UK incorporated firms The top 5 life and pensions insurers control 46% of the market, by premium income

MARKET LEADERS

Among the market leaders, banking and insurance groups alike rely on distribution through bank networks and financial advisors Aviva is the life insurance market leader, based on premium income HBOS trails the market leader in the life insurance sector Standard Life ranks third among life insurance companies Legal & General is the fourth highest ranked life insurer by premium income Lloyds TSB rounds out the top 5 life insurers

APPENDIX

Definitions Capital redemption policy / bond Composite insurer Defined contribution pension scheme Defined benefits pension scheme Group policy Individual pension scheme Individual policy Life assurance Occupational pension scheme Pension insurance policy Premium income Regular premium Single premium Technical provisions Traditional insurance Unit-linked insurance

Further reading

Interactive Databases

Reports and Briefs

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Datamonitor consulting

Disclaimer



List of Tables


Table 1: Life and pensions insurance premium income, segmented by product, EURm, 2001-2005

Table 2: Life and pensions insurance premium income, segmented by product, in percentages, 2001-2005

Table 3: Life and pensions insurance premium income, segmented by buyer, EURm, 2001-2005

Table 4: Life and pensions insurance premium income, segmented by buyer, in percentages, 2001-2005

Table 5: Life and pensions insurance premium income, segmented by investment risk, EURm, 2001-2005

Table 6: Life and pensions insurance premium income, segmented by investment risk, in percentages

Table 7: Investment assets of life and pensions insurance companies, EURm, 2001-2005

Table 8: Investment assets of life and pensions insurance companies, in percentages, 2001-2005

Table 9: Life and pensions insurance premium income, segmented by product, EURm, 2006-2010

Table 10: Life and pensions insurance premium income, segmented by product, in percentages, 2001-2005

Table 11: Number of life insurance providers segmented by type, as at Dec 2005

Table 12: Top 5 life and pensions insurers by premium income, as at Dec 2005



List of Figures


Figure 1: Life premiums accounted for just over half of total premium income in 2005

Figure 2: Individual policies account for the majority of life and pensions premium income

Figure 3: In the last 5 years, compound annual growth in premium income from non-unit-linked insurance has been negative

Figure 4: Following a decline in 2002, the proportion of investment assets held in equities has been increasing

Figure 5: Pensions will account for an increasing proportion of the growth in premium income between 2006 and 2010

Figure 6: UK life insurance companies and composites account for less than half of the market, by number

Figure 7: Aviva leads the UK life and pensions sector

Abstract

Introduction

This report is most appropriate for companies looking for an overview of the life insurance and pensions markets in order to assess the level of market opportunity (using our market data and forecasts), regulatory barriers and opportunities, and level of competition in the market. For more detailed market data please refer to Datamonitor's European Life and Pensions Interactive Database 2006.

Scope

Presents competitor market data for life insurance and pensions companies; Assesses regulatory barriers and opportunities; 5 years historic data from 2001-5 and 5 year forecast to 2010.

Highlights

A-day introduced the potential for investors to opt for long term savings products offered by asset management and other firms, instead of insurance companies. It also has implications for providers' relationships with their intermediaries, from the point of view of ensuring the quality of advice, given consumers' expanded investment options. The Pensions Commission's Second Report advanced proposals for the establishment of a National Pensions Savings Scheme (NPSS). This NPSS has the potential to increase savings flows and the demand for annuities, with the consequent positive impact on life insurance firms in the long term. UK life insurance companies face increased challenges in the form of low rates of inflation, competition from alternative long-term savings instruments and reform of the pensions regulatory regime. Firms may respond to the challenge of competition by pursuing mergers and acquisitions, which would alter the current low rate of market concentration.

Reasons to Purchase

Get an overview of the life and pensions market, including past growth and forecast growth; Assess regulatory barriers and opportunities affecting life insurance and pensions in this country; Analyze competition from life insurance compan

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