Long-term insurance premium income falls 35% in 2009

Long-term insurance premium income fell more than a third in the first nine months of 2009 compared to last year, research suggests.

The drop follows an 18% fall in UK insurance market premium income in 2008 to £215.3bn, according to research from International Financial Services London (IFSL).

IFSL's report, Insurance 2009, forecasts insurance premiums will remain subdued in 2009 with a recovery likely to begin next year.

In 2008, premiums shrunk following a fall in long-term premiums which typically account for around 80% of UK insurance business.

The sector also suffered due to exposure to the downturn through a fall in investment returns on assets and on the liabilities side through rising claims, though so far losses on both sides have been limited, according to IFSL's report.

UK long-term insurance premiums declined by nearly a quarter in 2008 to £168.1bn, with occupational pensions premiums experiencing the biggest decline, followed by life insurance.

Meanwhile, general insurance premiums increased by 8% during 2008 to £47.2bn mainly a result of an increase in business from overseas.

Gross premiums on the London Market were conservatively estimated at £24.7bn in 2008, up 13% on the previous year.

Funds under management of UK insurance companies totalled £1.5trn, almost double those of any other European country.

Marko Maslakovic, IFSL's senior economist, says: "The economic slowdown has shown the UK insurance sector is sufficiently capitalised.

"Insurance companies have minor exposure to mortgage-related assets and losses on insurance coverage have been limited to specialised lines of business.

"The insurance sector has acted as a stabilising factor at a time of considerable volatility in the broader financial markets".