The outlook for the UKs life insurance industry remains stable, according to research by Moodys, but a no-deal Brexit threatens to undermine growth for the sector.
In a new report, the financial services firm said that life insurers face increased risk of capital, revenue and profit deterioration if the UK leaves the EU without a deal.
By averting no deal, insurers can expect more growth opportunities in the bulk annuity and pensions market, offsetting pressure from low interest rates and regulatory headwinds.
"Operating performance will continue to improve in 2019," said Moody's vp-senior credit officer, Dominic Simpson.
"The improvement reflects structural shifts, such as greater freedom for savers to manage retirement savings and the automatic enrolment of employees into pension schemes."
Operating profit of leading life insurers rose by an average of 8% in 2018, with annuity writers benefitting from large reserve releases after life expectancy improvements slowed.
The report also reveals that the bulk annuities market - in which insurers assume corporate pension liabilities for a premium - doubled last year.
Continued expected growth will support an increase in life insurers' holdings of illiquid assets, which have mixed credit implications.
Moody's explained that a key advantage for UK life insurers relative to European peers is that the majority of their reserves are unit-linked with no interest guarantees.
However, it warned that very low yields suppress their investment returns, and that Solvency II ratios are vulnerable to falling interest rates.
Moody's said that capitalisation in the UK's life insurance sector is "currently comfortable", but added that Brexit remains a "wild card".
"A caveat to Moody's stable outlook is that, in the event of a no-deal Brexit, insurers face increased risk of capital, revenue and profit deterioration, a credit negative," the firm said.