The UK offshore bond market is growing strongly with 2021's total UK new business set to pass the £7bn mark, up from £5bn in 2020, according to AKG's new report ‘The Revolution Will Not Be Televised - 30 Years of Quiet Change in the UK Offshore Life Sector'.  

Ireland continues to be the leading home jurisdiction for UK offshore bonds accounting for over 50% of new business in the last two years, with the Isle of Man taking less than 40% and Luxembourg the remainder.  

AKG further revealed that just eight companies representing six unique brands are now at the heart of the market, accounting for over 90% of total new business written in the last two years. 

  • Utmost
  • Canada Life
  • Standard Life
  • St James Place
  • Prudential
  • Lombard 

This means that since 2007, when there were more than 30 cross-border life companies targeting the UK offshore life market, the number of companies has shrunk by over two-thirds.  

Guy Vanner, AKG's managing director said the new report seeks to shine a light on evolutionary aspects for advisers, paraplanners and other interested strategic partners.

"Now an established and fully integrated aspect of the UK financial services industry, the history of the UK offshore bond market is a fascinating one. But what do we know of this sector that has quietly evolved over the last 35 years or so?"

He added: "Like many parts of the wider financial services landscape, on a day-to-day basis we perhaps take the UK offshore life sector a bit for granted but reminding ourselves of this perspective is no bad thing as it may even have poignant reminders for some, or lessons for the future for others.

"Indeed, as the market moves on and develops further, seeing the back-story of this market and those successful market participants, who are now at its heart, hopefully adds understanding and deepens the beneficial relationships across the value chain."

The report said that the UK offshore bond market is an established and fully integrated aspect of the UK financial services industry, with advisers using offshore bonds as a mainstream financial planning solution.

"The most recent mergers and acquisitions activity in the market, Utmost's acquisition of Quilter's Isle of Man and Irish life companies in late 2021, took the number of significant provider companies down to 10. 

"In addition to the eight companies behind the six brands mentioned, Transact and RL360's UK activities, both focused on offshore bond business written on investment platforms, supplement these to make up the total.

It further said that "while the choice of brands available in this market is relatively limited, the six key brands are all credible to advisers and their clients, comprising a mix of traditional financial brands with a long heritage and younger specialist provider brands."

On another front, AKG also highlighted  how the scale of growth in offshore bond investments being managed by DFMs has meant that offshore life companies have had to become more adept at integrating with DFMs for portfolio management and custodianship.

"It also triggered a significant shift towards Ireland as the most favoured cross-border life jurisdiction as DFMs looked to take advantage of their fees being zero rated for VAT (giving a cost advantage over Luxembourg and Isle of Man where VAT rates are 17% and 20% respectively)."

AKG's conclusion on where the market goes from here included highlighting political forces that represent a "very real risk" to its future. 

"The challenge of future viability of a market for which much of its raison d'etre hangs on government actions has to be understood on an ongoing basis", it said. 

To access the report in full, go to AKG here.