UK life and P&C insurers maintain stability

Written by Adam Cadle

16/10/2025

The outlook for the UK life insurance and P&C sectors remains stable, even as economic challenges continue to weigh on the broader market, according to Moody’s Ratings.

Moody’s said the continued sale of mandatory P&C policies are expected to support insurers’ overall revenue. Elevated interest rates will also remain a positive factor, helping to sustain investment income across the industry.

Furthermore, Moody’s said pension risk transfers will continue to be a major source of earnings for life insurers, driven by sustained corporate demand for such arrangements.

However, competition in this segment is intensifying, putting pressure on margins. Moody’s said it expects this momentum to continue but warned that as more insurers enter the market and competition for suitable long-term assets intensifies, margins may narrow.

Although investment portfolios across the sector remain diversified and of high quality, Moody’s warned that the growing share of assets tied to annuities will increase overall exposure to asset risk.

On the capital side, Moody’s said that UK insurers remain strongly capitalised and resilient under a range of stress scenarios. However, the agency does not expect solvency ratios to strengthen further, as insurers are likely to reinvest excess capital into business growth, mergers and acquisitions, or shareholder distributions.

Moody’s also highlighted ongoing sensitivities in the life sector, including potential risks from falling interest rates, property devaluations, and corporate bond defaults—all of which are more pronounced given the current economic backdrop.

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