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World Insurance Report

Policy surrender rate up

Europe

Although UK policyholders are reportedly cashing in their policies at “a seemingly alarming rate”, domestic life insurance companies are currently withstanding the credit crunch and reporting positive net growth figures, according to the latest report by rating agency Fitch on the UK life insurance sector. Fitch also noted that UK insurers, in contrast to UK banks, have reported very low exposures to sub-prime assets. David Prowse, Senior Director in Fitch’s Insurance Group in London, said that a lot of the business cashed in gets “recycled” rather than lost as policy-holders often invest proceeds from existing policies into new policies. So overall, companies are still reporting positive net growth. The Fitch report described companies’ business volumes as almost unchanged from the second half of 2006. Mr Prowse said that the UK life sector has rebuilt its capital levels in recent years, driven by stock market growth since 2003, “giving a significant buffer to withstand the increased volatility in the stock markets.” However, Fitch was concerned about the potentially detrimental impact of economic instability on consumer confidence. Mr Prowse said that Fitch will continue to monitor the sector for any significant worsening of sales volumes, margins or policy surrender rates, downgrading of bond portfolios or rises in bond default rates.

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