Axa pulls enhanced annuity due to Solvency II fears

Axa is pulling out of the enhanced annuity market claiming Solvency II will reduce the attractiveness of annuities for both providers and customers.


Axa began pilotting a product in the enhanced space, which is dominated by the likes of Just Retirement, Partnership and Canada Life, two years ago.

But has this week emailed advisers stating draft rules that require insurers to hold more capital have prompted it to exit the market.

Axa says steps will be taken to close the product to new business at the “earliest opportunity”.

It says: “New EU governing rules around Solvency II are due to be introduced in 2012. These rules are expected to require annuity providers to hold more capital in reserve.

“As a result of the uncertainty that this will create for the attractiveness of annuities for both customers and providers, we have decided to end the pilot of our enhanced annuity product.

“This decision has been taken following a lengthy and thorough review.”

Axa will continue to accept new quotations until Friday, re-quotes until January 29 and applications until February 12.

The Retirement Adviser director of retirement planning Nick Flynn says: “Axa was really making a mark in this market so this is a real shock.

“The news is the first really tangible problem caused by Solvency II but it will not be the last.

“Not only will annuities be of less interest to insurers, it will reduce rates further making them less attractive to clients. It will be interesting to see if other providers follow suit.”

Just Retirement external affairs associate director Scott Fulton says: “Our analysis of Solvency II suggests there is nothing specific to enhanced annuities within the current draft while the potential impact of this developing framework on the wider annuity market has been well rehearsed.

“We are aware the European Commission and European regulatory bodies are engaging constructively with the UK annuity industry.

“We remain confident that a pragmatic outcome will be achieved, balancing security of policyholder benefits with a competitive market for retirement income provision, including a thriving enhanced annuity market.”
 
http://www.moneymarketing.co.uk/pensions/axa-pulls-enhanced-annuity-due-to-solvency-ii-fears/1005222.article