United Kingdom - A.M. Best
Transcript of United Kingdom - A.M. Best
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Nominal GDP USD bn 2624.53Population mil 66.1GDP Per Capita USD 39,735Real GDP Growth % 1.8Inflation Rate % 2.7
Literacy Rate % n.a.Urbanization % 83.1Dependency Ratio % 55.5Life Expectancy Years 80.8Median Age Years 40.5
Insurance Regulator
Premiums Written (Life) USD mil 189,833Premiums Written (Non-Life) USD mil 93,499Premiums Growth (2016 - 2017) % -0.3
United KingdomFranceGermanyIrelandItalySpain
CRT-2CRT-2
Country Risk TierCRT-1CRT-1CRT-1CRT-2
Vital Statistics 2017
Insurance Statistics
Regional Comparison
Prudential Regulation Authority (part of Bank of England)
United Nations Estimates
Source: IMF, UN, Swiss Re, Axco and A.M. Best
Regional Summary: Western Europe•WesternEuropeisahighlydevelopedandaffluentregion.
The 28 countries of the EU accounted for approximately 21.9% of the world’s domestic product in 2016 and 21.6% in2017,afigurethatisprojectedtogrowto22.5%in2018.
•Growth has been driven largely by rising domestic demand duetogrowingconsumerandbusinessconfidence,lowerunemployment rates, and credit growth.
•The European Central Bank (ECB) has decided to end its three-year EUR2.4 trillion quantitative easing program by the end of 2018, although it did signal that any rise in interest rates before September 2019 was unlikely. The policy rate has been below 1.0% since July 2012 and has been at 0.0% since March 2016.
•Concerns include political instability in certain countries, ongoing uncertainty about Brexit and its potential implications,andbelow-trendgrowthandinflation.
Economic Risk Political Risk Financial System Risk
Country Risk Tier 1 (CRT-1) Very Low Level of Country Risk
Country Risk Tier 2 (CRT-2) Low Level of Country Risk
Country Risk Tier 3 (CRT-3) Moderate Level of Country Risk
Country Risk Tier 4 (CRT-4) High Level of Country Risk
Country Risk Tier 5(CRT-5)VeryHighLevelofCountryRisk
United KingdomCRT-1August 22, 2018Region: EuropeCountry Risk Criteria ProceduresGuide to Best’s Country Risk Tiers•TheCountryRiskTier(CRT)reflectsA.M.Best’s
assessment of three categories of risk: Economic, Political, and Financial System Risk.
•The United Kingdom (UK) is a CRT-1 country, with very low levelsofeconomic,political,andfinancialsystemrisk.
•Economic and political uncertainty following the referendum vote to leave the European Union continues to dampen growth prospects in the UK. Real GDP in 2017 grew 1.8%. Economic growth forecasts vary widely, depending on the manner and terms by which the UK exits the EU. However, medium-term economic growth is expected to be between 1.0% and 2.0%.
•A.M.Bestcategorizesthemajorityofcountriespicturedinthe map as CRT-1 and CRT-2. Notable exceptions are the Eastern European countries of Bosnia and Herzegovina, Belarus, and Ukraine.
BEST’S COUNTRY RISK REPORT
Economic Risk: Very Low•TheUKhasaservice-basedandwelldiversifiedeconomy.
Services account for 80% of GDP.
•Uncertainty surrounding Brexit pervades the economy. Growth in 2017 was positive but subdued, at 1.8%, and is expected to remain muted in the short term. Given the unpredictability of Brexit’s ultimate outcome, investment has also slowed.
•The EU is one of the UK’s primary trading partners, with exports to the EU accounting for almost half of its trade. Thus,BrexitposessignificantriskfortheUK’sexports.Retaining strong trading ties with the EU after it formally leaves will mitigate economic risk.
•InflationasofJuly2018was2.4%.TheBankofEnglandraiseditsbaselendingrateby25basispointsonAugust1,2018,inanefforttomoveinflationclosertoits2%targetrange, sustain growth, and encourage employment.
Political Risk: Very Low•Prime Minister Theresa May is attempting to negotiate
the Brexit process, but her center-right conservative party controls only a minority position in Parliament. As a result, Mayenteredintoa“confidenceandsupplydeal”withtheDemocratic Unionist Party (DUP) under which Northern Ireland receives additional funding in exchange for the DUP’s support on important legislation.
•The government will focus on negotiating the exit terms of Brexitandloweringthefiscaldeficitovertheshortterm.
•Despite the risks associated with Brexit, the UK remains a business-friendly environment with an effective legal system, well established property rights, and low corporate taxes. In the World Bank’s Ease of Doing Business Index, the UK ranked highly, at 7 out of 190 economies.
•Terrorist risks are elevated. Over the past three years, the United Kingdom has suffered a number of terrorist attacks.
Financial System Risk: Very Low•The Prudential Regulation Authority of the Bank of Englandregulatesthefinancialservicesindustry,includinginsurance.
•TheUK’sfinancialsectorisaninternationallyrecognizedhub, with assets valued at 10 times GDP.
•Capital buffer requirements have been increased to secure banking sector stability. Global tightening of monetary policy, uncertainty surrounding Brexit, and rising trade tensionscouldallbedisruptivetothefinancialsystemoverthe near to medium term.
•According to the Bank of England’s June 2018 Financial Stability Report, household and corporate debt in the UK remain below 2008 highs, credit growth remains in line with overall GDP growth, and debt-servicing burdens are low. One area of concern would be the rapid expansion of non-bank lending to riskier companies.
Economic Growth (%)
-5
-4
-3
-2
-1
0
1
2
3
4
5
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Real GDP CPI Inflation
Source: IMF World Economic Outlook and A.M. Best
Political Risk SummaryScore1(best)to5(worst)
0
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5International Transactions
Policy
Monetary Policy
Fiscal Policy
Business Environment
Labor FlexibilityGovernment Stability
Social Stability
Regional Stability
Legal System
United KingdomWorld Average
Source: A.M. Best
United Kingdom
GDP Per Capita and Population
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United Kingdom
France Germany Ireland Italy Spain
USD
Millions
GDP Per Capita Population
Source: IMF and A.M. Best
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BEST’S COUNTRY RISK REPORT
Page 2 of 2 August 22 2018