Despite slowing business growth, Scotland's life and pensions sector remains relatively strong

Despite the onset of the recession, Scotland's life and pension companies have proved to be remarkably resilient.

One of the major moves in the sector was the announcement that Standard Life chief executive Sir Sandy Crombie is to step down after 42 years at the Edinburgh-based insurer.

In his time in the top job - which he took on in 2004 when the company was in financial meltdown - he has overseen its successful demutualisation and flotation.

Within the sector, while there is slowing in terms of business growth because of the recession in the UK and the slowdown generally, the core fundamentals of the business continue to be very positive.

Aegon UK chief executive Otto Thoresen believes the demographics of the country play a big part in what drives growth in the medium to long term.

"Potentially there are significant opportunities as the industry begins to think about what sort of propositions consumers want access to in the medium and long term; to address their concerns about the volatility in stock markets; and to give people confidence about returns they can generate and the outcomes they will experience," he explains.

David Claxton, a partner at accountancy firm Deloitte, believes insurance firms have generally done better than the banking sector.

He adds: "Life and pensions companies went through their low point in 2002, the last time the market dipped significantly. They learnt a lot more from their experience than the banks did at that time.

"While they would like more capital, they are in a relatively strong position compared to other parts of the financial services sector."

Recent new business results coming out of the life companies have been relatively strong. They have done quite well, particularly in protection business, but there has been a dip in savings and investments.

This is to be expected because of people's worries about where they should place their money. They also need more access to their money than some savings products provide.

Owen Kelly, chief executive of Scottish Financial Enterprise, says: "We've seen some very robust results from some of our biggest players like Standard Life and Scottish Widows. That should give us confidence that these companies remain very solid and productive.

"It is a worldwide financial crisis and, like everybody, they are having to cope with tough times.

"But the skills base we have in Scotland is uniquely strong in the UK and in Europe."

After 2002, the FSA also learnt, in respect of life insurance rather than banking, not to precipitate a crisis.

"In 2002, when markets were falling and some life companies' solvency position was questioned by the FSA, the regulator forced insurers to sell equities," Derek Wright, partner at Deloitte, explains.

"That created a downward spiral because the markets were already falling and the regulator was pushing for them to sell even more equities.

It was a self-fulfilling prophecy in many respects."

Away from life and pensions, general insurance has also enjoyed some success. Edinburgh-based Tesco Personal Finance has already issued more than 2.7 million insurance policies, from pet insurance through to car insurance.

According to chief executive Benny Higgins, the firm already holds around 4.5 per cent of the car insurance market.

He adds that the next step is to broaden and deepen the company's relationship with customers.

"That will involve doing more of what we have done well and also doing new things," he explains.

"We will have products and services that are transparent and simple and perhaps the most distinguishing feature is that we will reward loyalty.

"Financial services businesses often equate loyalty to inert behaviour.

"Most of the new business battle- field for financial services is fought at very low margins and the profitability of the business is supported by very large margins on the back book.

"That is something that we are not setting out to replicate."