Despite sluggish growth during 2010-2014, the outlook for the UK life insurance sector is positive, according to a data provider.
A report by Timetric found that due to low returns on investments and low interests rates, the market's gross written premiums grew at a slower pace at a compound annual growth rate of 0.7% - from £137.7bn in 2010, to £141.7bn in 2014.
But the sector remained the "largest segment in the industry", accounting for 72.8% of the insurance industry's gross written premium in 2014, it added.
The firm predicted that in the next five years gross written premiums of the sector would grow to £163.7bn in 2019 due to the country's "favourable demographics", increased demand for bulk annuities and developments in income tax relief.
Changes to tax relief that would boost the life sector include the rise in personal allowance from £10,000 in 2014/15 to £10,600 in 2015/16, and further increases to £10,800 in 2016/17 and to £11,000 in 2017/18.
Timetric also reported on the UK government's announcement on tax benefits for married couples and civil partners falling into the base rate tax bracket. According to the new rule, eligible couples could make a tax free transfer of up to £1,060 to their partners.
The firm said these changes would increase real household disposable income and facilitate investments in life insurance products.
As for bulk annuities, it explained that due to low interest rate environment and the Solvency II regulation, pension scheme providers were buying bulk annuities to compensate for their liabilities.
It said in October insurers including Prudential, Aviva, Partnership, Legal & General, Just Retirement and Rothesay Life entered into agreement with defined benefit risk team of Mercer to provide bulk annuity products.
In June, Prudential signed an agreement with the Northern Bank Pension Scheme to provide bulk annuity worth £680m.
However, Timetric warned the recently implemented Pension Schemes Act 2015 posed a negative impact on the purchase of annuities.
Jay Patel, insurance analyst at Timetric, warned that the changes, including giving workers more control over their pension funds after retirement, would undermine investments in pensions and annuity products.
Patel said: "These reforms will reduce the margins for insurers, affecting investments in infrastructure and corporate bonds. In order to overcome this, insurers are encouraged to develop new products for retirees who do not require annuities."
