S&P: UK bulk annuity insurers withstand severe credit stress
S&P Global Ratings said UK bulk annuity insurers remained resilient under a severe credit stress scenario, with private credit exposure still manageable even after it tested the sector against a harsher default and downgrade path. The note comes against a backdrop in which UK pension insurers had 8.8% allocated to private credit, compared with 4% for European insurers and 1% for European reinsurers. Meanwhile, Legal & General, Standard Life and Just Group each had more than 10% of their funds in illiquid private credit.
S&P’s scenario work used a hypothetical portfolio split 50/50 between property-secured assets and private credit holdings, stressing the former with the 2001-2002 credit shock and the latter with the 2007-2009 financial crisis. It also ran a more severe internal-rating sensitivity in which the internally rated book was downgraded entirely to BB, alongside a separate BBB case, and added a 20% fall in property values for equity release mortgages.
The broader message was consistent with S&P’s earlier EMEA scenario analysis, which found capital adequacy at about 35% of insurers could be sensitive to a prolonged financial market downturn, even though the sector as a whole was likely to prove resilient. For UK life insurers, that resilience depends on how spread widening, downgrades and lower property values feed through the matching adjustment, technical provisions and own funds.
--- Sources: https://www.spglobal.com/ratings/en/research/articles/260719-scenario-and-sensitivity-analysis-u-k-bulk-annuity-insurers-private-credit-exposure-set-to-remain-manageable-under-a-severe-adverse-scenario-13399870 https://www.bankofengland.co.uk/prudential-regulation/publication/2025/november/life-insurance-stress-test-2025-results
Sources: spglobal.com · bankofengland.co.uk
