Fitch: Falling Yields Hit UK Life Insurers’ Solvency II Ratios


(The following statement was released by the rating agency) Link to Fitch Ratings’ Report: UK Life Insurance Dashboard – 1H16 Results here LONDON, August 23 (Fitch) Fitch Ratings says Solvency II (S2) ratios declined in 1H16 across the UK life insurance sector, driven by a fall in interest rates, particularly after the leave outcome (Brexit) in the EU referendum. S2 requires insurers to hold a risk margin for longevity risk, a requirement that increases significantly when interest rates fall, and an important consideration for annuity business. However, on an economic basis, annuity business is well shielded from interest rate movements through the close duration matching of long-term insurance liabilities with similarly long-dated bonds. Low yields do not weaken the capital position of annuity business under Fitch’s Prism factor-based capital model (Prism FBM), and are not a direct threat to UK life insurers’ credit ratings. The rating outlook for the UK life sector is stable, reflecting the diverse business mixes of rated insurers and their strong capital positions according to Prism FBM and under S2. These strengths have enabled rated insurers to withstand the decline of the individual annuity market and will help them to absorb the potential disruption and costs from regulatory investigations and “Brexit”. The “UK Life Insurance Dashboard – 1H16 Results” is available at or by clicking on the link above. Contact: Sam Mageed Director Insurance +44 20 3530 1704 Fitch Ratings Limited 30 North Colonnade London E14 5GN David Prowse Senior Director Insurance +44 20 3530 1250 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email:; Athos Larkou, London, Tel: +44 203 530 1549, Email: Additional information is available on ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY’S PUBLIC WEBSITE ‘WWW.FITCHRATINGS.COM’. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE ‘CODE OF CONDUCT’ SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH


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