The With-Profits Market report 2022, has been launched today, by Hymans Robertson. The annual report highlights that Insurers in the with-profits industry are likely to face another challenging year. For many firms this will require a heavy focus on strategic thinking which will be needed, if they are to continue to protect and provide good outcomes for policyholders in the future.  

The report, from the leading pensions and financial services firm, highlights some of the issues faced by with-profits firms ranging from new regulatory considerations around Consumer Duty and operational resilience, through to navigating difficult economic conditions, the cost-of-living crisis, inflation and general market-volatility. For those managing with-profits funds, it suggests that strategically managing risks like those faced in 2022, will be central to their success. It highlights, for example, that some Insurers may review aspects of their liquidity management frameworks taking actions such as recalibrating their liquidity models and forward-looking stress scenarios.  

The research also looks at the possible impact of the FCA’s Consumer Duty and says it may require a shift in thinking from Insurers as they prepare for implementation deadlines of July 2023 for open-books and July 2024 for closed books. It suggests insurers should consider carrying out a number of reviews specifically, to understand how their products meet the needs of customers, how they offer fair value and how communication around their products impacts customers’ behaviour. It also looks at how the new operational resilience requirements, which were announced last year and need to be fully implemented by end-March 2025, impact insurers.  

Commenting on how existing and new challenges can be best managed by insurers in the with-profits sector, Dan Diggins, Head of Regulated Roles at Hymans Robertson said: 

“Insurers in the with-profits sector have had another year of economic turbulence. While most have demonstrated great resilience and are in a good position, some could feel a resourcing pinch as they’re impacted by the day-to-day activity of preparing for new regulations. From Consumer Duty through to operational resilience requirements there is a lot to do.  

“That said, we wonder whether the new regulations and prevailing economic conditions may offer an opportunity for innovation. For example, we might see new products which incorporate some of the features of with-profits products that are valuable to certain consumers, such as smoothed returns or guarantees, that would protect customers from market volatility and unexpected reductions in pay-outs.  These would be valuable attributes to build new products around and could be particularly helpful to policyholders navigating their retirement journey.”