Court Ruling puts UK insurers’ annuity book disposals at risk

Written by Adam Cadle

27/08/2019

UK life insurers seeking to reduce their exposure to annuity risks by offloading portfolios to other insurers may have to rethink their plans as a result of the High Court’s decision in August to block Prudential Assurance Company’s proposed £12bn transfer to Rothesay Life, Fitch Ratings has said.

“The ruling by the High Court of England and Wales sets a precedent that will restrict insurers’ ability to transfer annuities to smaller of less established companies, such as Rothesay, which was only created in 2007," the ratings agency added.

“Offering incentives to make policyholders more amenable to a transfer might help in certain cases. Nevertheless, we expect some insurers will have to retain business that they were hoping to offload, and instead use reinsurance or other forms of risk transfer to limit their annuity risks.”

Fitch added that while this might meet an insurer’s main aim of reducing risk, it could be more costly. The insurer would have to hold capital for counterparty risk and would still be responsible for administering the contracts and making payments, it said.

Related Articles