Standard Poor's Ratings Services issued a statement today charging that the fundamental structure of the U.K. life insurance sector is changing. Life insurers over the next few years will have to adapt their business models at both the local and European levels to accommodate changes due to economic weakness and regulatory changes, notes the rating agency. Market consolidation could accelerate and product economics could be reappraised, with renewed attention on distribution models, notes S&P.

S&P based its comments on a report published today. "Financial And Economic Risks Continue to Exert Downward Ratings Pressure On U.K. Life Insurance Sector." The report argues that the financial crisis has precipitated shifts in product mix and asset and capital allocation ahead of the European Commission's Solvency II directive on insurance regulation. New business growth against the current economic backdrop remains difficult; in addition, top-line sales may appear flattering, but can be illusory when viewed against the net outflows from the sector, notes S&P.

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