UK life insurance – increasing gains
UK life Insurance saw significant growth during the last six months of 2013.
07:45 27 January 2014
The Government, over the past six years, has been working assiduously to reinstate people’s faith in the markets. It was not until 2012 that these efforts started to bear fruit as individuals started to come out of the depression caused by the financial collapse. They started showing more positivity towards investing in the markets and wanted to increase the amount of risk they were willing to take. As investors began taking more risk people began increasing UK life insurance purchases.
UK life insurance companies contain the following characteristics, which can demonstrate the reasons behind their increased gains:
- They profit most from economically stable times. This is due to investments in what is known as fixed-income assets.
- The more they have in the way of premiums- the money they use to invest-, the more profit they potentially make especially since they do not have to pay the return on that money until the policyholder’s death
- UK life insurance companies perform well in growing markets. Unfortunately, that also means they perform worse in degrading economies.
UK life insurance companies generally invest in fixed-asset options, as mentioned before; this includes bonds, one of the most common investments. Bonds show a larger profit when corporations are doing well, since this creates a greater demand for corporate bonds. Increase in gains however, may not be seen right when a company invests in them. It can take a while for the total value to increase. It may also take a while for it to trickle down to the insurance policy holders.
The benefits for UK life insurance companies are that they are able to show strong gains without increasing risk. Companies are all gearing towards the 2014 fiscal year with a positive view. This means that the life insurance market will follow suit by investing in increasing amounts of both government and corporate bonds.