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The study, published by the Ernst & Young ITEM Club, forecast that low interest rates, higher hedging costs, lower business volumes and the impact of Solvency II will hit insurers. The report predicted insurers' profits will consequently fall for the second year in a row.
Carl Astorri, senior economic adviser for the ITEM Club, said 2012 is already proving to be a "tough year" for the insurance industry. He explained: "Insurers need to plan their businesses on the assumption that the low interest rate environment is here to stay for some time. They need to wean customers off the guarantees that are creating the asset and liability matching problems, prices need to rise for property and casualty insurance, annuity rates need to fall and distribution models for life insurers need to be reassessed."
The report comes on the back of a separate study released last week, which said UK brokers had seen their revenues fall by an average of 3.9 per cent every year since 2007.