While the scourge of novel coronavirus continues unabated, creating havoc around world economies and financial markets, insurance markets have been under the scanner struggling to stay afloat amidst enhanced credit risk exposure, reputational risk, increased volatility, and risk of heightened life insurance claims.

Besides, UK insurers have been in the spotlight with the direction of European Insurance and Occupational Pensions Authority (EIOPA) on suspending non-discretionary dividend pay-outs and share buybacks. In view of the same, prominent players such as Aviva, RSA, Hiscox and Direct Line have already revealed their 2019 dividend suspension plan.

However, this seems to be in good faith positioning insurers in an apparently better position in near to mid-term keeping in mind regulatory risks, wider stakeholders’ interests and prudent risk management, with stress testing and capital projections playing an important role here considering their objective of policyholders’ protection.

Moreover, we cannot ignore the varied impact on different business lines, wherein although some heat has been felt on segments requiring medical practitioners’ inputs, other segments are experiencing heightened demand of policy protection amidst global health crisis.

As per the latest available data, the total worth of investments being managed by the UK insurance industry is pegged around £2.0 trillion, with the top five companies viz, Aviva, American International Group (AIG), AXA UK, Zurich Insurance Group and RSA Group, alone having around £30 billion of gross written premiums.

Fitch Ratings has recently affirmed the ratings for ten UK life insurance players, maintaining outlook for five life insurance groups, while revising for five others. This reinforces confidence in the positioning of UK life insurers, who seem to be strongly capitalised to breeze through the market crisis with although dented but reasonable solvency coverage ratios within target capital ranges.However, surging demand for life insurance claims amidst rising mortality and uncertainty could turn the wind in a jiffy.

With regulatory supervision, disruptive innovation and digitisation, and fierce competition driving the future face of UK general and life insurance space, a dedicated focus on improving customers’ financial well-being along with maintaining profitability and operational resilience is equally important. Some headwinds are expected amidst uncertainty around COVID-19 scenario and its impact on both the asset and underwriting side of the balance sheet.

by Kunal Sawhney, CEO of Kalkine.

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This is the profile of the UK Investor Magazine team who, in collaboration with each other and our partners, produce a number of in-depth analytical articles, reviews of investment services and publish sponsored articles from carefully selected partners.