Sentiment rose among UK life insurers in Q4 2018 - and was stable in the general insurance sector - according to the latest CBI/PwC Financial Services Survey.
Although sentiment deteriorated in other financial sectors, such as banks and building societies, the quarterly survey of 84 financial firms found the mood among insurers held up better amid a continued expansion in their business.
Business volumes increased across life and general insurance, and they were the only financial services sectors in the UK reporting growth this quarter, said the survey.
UK life insurance profitability was high in Q4 2018, according to the survey.
However, the general insurance sector reported declining profitability for a second consecutive quarter, driven by rising costs and the high-profile worldwide losses including major climate events, such as hurricanes and wildfires.
On employment,the survey found headcount was down and is expected to fall further in the coming three months, both in life and general insurance.
This is because of greater use of outsourcing as well as strong investment in IT to improve customer experience.
The study said general insurers, banks and building societies see macroeconomic uncertainty as the most important challenge over the year ahead - ahead of regulatory compliance and preparing for the impact of Brexit.
Meanwhile, life insurers and finance houses believe their biggest challenge is to make better use of customer data to improve customer experiences and business performance.
Looking ahead to the next 12 months, all the life insurance respondents said forming strategic partnerships or alliances will be an important element in their growth strategies.
Meanwhile, 95% of general insurance respondents said IT systems and applications, followed by acquiring new customers, would be the key parts of their growth strategies over the next year.
Engaging in M&A transactions was ranked bottom by both life and general insurers as important parts of their growth plans in 2019.
CBI chief economist, Rain Newton-Smith,said a combination of macroeconomic and Brexit uncertainty, regulatory compliance and global market volatility are taking a toll on the UK’s financial services sector.
Newton-Smith said: “It’s clear the sector is grappling with a number of other challenges too, from using data to improve customer experiences, to new entrants to the sector.
"However, with new risks and demands come opportunities. Insurers in particular are pulling ahead, many of whom are moving into areas such as asset management outside of their traditional markets.”