UK - Interest rates hit Solvency II ratios across life sector
Wednesday, 08 24 2016, Category: Insurance and Reinsurance, Country: United Kingdom
Solvency II ratios declined in the first half of 2016 across the UK life insurance sector, driven by a fall in interest rates, particularly following Britain’s decision to leave the EU, according to Fitch Ratings.
Solvency II requires insurers to hold a risk margin for longevity risk, a requirement that increases significantly when interest rates fall, according to Fitch.
On an economic basis, however, it said annuity business is well shielded from interest rate movements through the close duration matching of long-term insurance liabilities with similarly long-dated bonds.
Source: Intelligent Insurer