Paul Clarke, Partner, PwC said:

“With the Life Insurance supervisory team leading the review, ultimately this provides the first indication of what insurance firms can start to expect from the Financial Conduct Authority.

"Pricing of annuities is complex and how Solvency II will treat these products has yet to be determined, which creates uncertainty. Additionally, there is a tension between prudential regulation and market pricing. The uncertainty relating to the capital requirements under Solvency II and the capital regulators require firms to hold against bond default are both factors which will be considering in setting prices.

"However, this review is important and arguably timely. With greater numbers of retirees and increased longevity, the significance of this area to an aging population is increasing."