Correspondence: Irina Kendix, Towers Perrin, 71 High Holborn, London, WC1V 6TP, UK. Tel: +44 020 7120 2000; Email: irina.kendix@towersperrin.com

¹is a consultant in the London office of the Tillinghast business of Towers Perrin.

Received 28 September 2006; Revised 28 September 2006.

Abstract

Guarantees were once an essential part of the life insurance market, but this has changed across much of Europe, In the UK, the move away from guarantees has been prompted by a combination of consumer, adviser and regulatory behaviour. Consumers tend to feel that guarantees come with high costs, insurers find that guarantees offer lower returns and regulators want to ensure that the true nature and cost of the guarantee is disclosed. Consequently, whereas the primary and unique role of insurers was once to pool and spread risks to provide individuals with guarantees, insurers must now compete directly with other asset gathering financial services institutions.