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‘Late summer snapshot: The life insurance market’ by Holly Hill

Published On: 21 October 2024
A head and shoulders photo of Holly Hill.

Associate Director Holly Hill provides an overview of the UK and international life insurance market, detailing how demand and capacity have changed in recent months and the impact this has had on underwriting.

Demand

We are currently seeing strong demand for seven-year run-off cover for gifts being made prior to the Budget on 30th October.

Seven-year run-off cover represents excellent value with standard non-smoker costs as a percentage of the gift being less than 0.5% up to age 60 and less than 1.5% up to age 70.

Many clients who are currently not domiciled will fall into the proposed new regime for inheritance tax (IHT) and will have significant IHT liabilities from next April. Trustees of excluded property trusts with UK resident settlors are likely to find that the trust assets become subject to IHT. Many of them are very concerned as to how those liabilities will be funded and are considering buying insurance that provides the money to pay the tax as it becomes due. If there is an expectation that assets will be sold to pay the IHT then clients need to consider how the IHT is to be funded so that probate can be obtained: we have seen probate financing costs as high as 2% a month, rising to 7.75% for HMRC.

If clients are leaving the UK and realising all their UK assets then there is likely to be a tax tail, which may increase to 10 years in the new regime.

Capacity

Overall UK capacity remains at around £100 million for term insurance on any one life or around £50 million for whole-of-life, with each insurer typically offering up to about £20 million on treaty (agreed) rates with bespoke (normally more expensive) pricing above this.

On large cases most insurers reinsure 100% of the risk – limits under reinsurance treaties are increasing marginally for some insurers but we have seen the re-introduction of jumbo limits whereby a re-insurer restricts what they are prepared to offer if the total cover in the market exceeds their jumbo limit.

Aviva has taken over AIG and we have seen a loss of capacity through this as the AIG capacity is absorbed into Aviva’s limits.

Aviva has forced the withdrawal of AIG’s market-leading joint-life, last-survivor term insurance policy except through dedicated high-value brokers such as John Lamb Hill Oldridge. The AIG product is market-leading in terms of competitive rates and its separation clauses in the event of parties separating.

US capacity remains strong and we are increasingly accessing this for clients where we are unable to obtain sufficient cover in the UK or where the clients are resident in the EEA as these cannot be accommodated post-Brexit in the UK market.

Non-resident clients

AIG (prior to their acquisition by Aviva) had an excellent facility that we could access in most cases for non-residents with UK liabilities to IHT. This was withdrawn without warning by AIG/Aviva. There is now no UK market for EEA resident clients and a very limited UK market for non-residents outside the EEA – however we are managing to place a few cases.

Underwriting

Underwriting continues to be challenging. If a client wants life insurance at a significant level then the insurer will want a report from their GP(s) including copies of all investigations that have been carried out, certainly within the last 10 years, and for the client to attend a medical. We are currently experiencing very long delays in obtaining GP reports and those delays are as prevalent in the private GP world as in the NHS. Insurers pay the GPs for the reports but we are typically seeing delays of over two months between request and the report being received.

Most of our clients will have private and NHS GPs. The private GP usually focuses on preventative medicine so they investigate much more than would be investigated on the NHS.

Get in touch

To find out more about how our team can support you in providing life insurance for high-net-worth and ultra-high-net-worth clients, please get in touch. You can email [email protected] or call us on 020 7633 2222.

Author: Holly Hill, Associate Director

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