Aviva Life International is exiting the offshore bond space on 26 February amid deteriorating market conditions and a lack of consumer demand.
Administration of its closed book business will pass to Ireland-based Capita Life & Pensions Services as part of a third party supplier agreement on 1 April 2010.
A letter has been sent out from the provider of offshore investment solutions to existing customers resident in its core UK market, as well as advisers, notifying them of the handover and with the guidance their policies will not be affected.
Administration of the closed book will be managed out of Dublin by Capita, though a small Aviva team will be kept on to oversee operations.
Most of the business' 75 employees will transfer to Dublin-based Capita under Transfer of Undertakings Protection of Employment (TUPE) regulations, Aviva has confirmed.
Aviva Life International managing director Tim Madigan cites a strategic review of the business, poor market conditions and a significant decline in demand for offshore investments from UK customers and advisers, as reasons for the exit.
"Our decision to close offshore bonds to new business reflects the significant decline in new business sales across the offshore bonds market. However, we will continue to support our existing customers and their policies, and there is no change for them at all."
Other offshore operators have also reported a challenging environment.
Royal London 360 reported sales slumped in most markets by around 40% last year at the half year mark, and Standard Life figures showed its offshore bond sales were down 44% last year at £370m compared to £661m in 2008.
However Colin Thores, European product development manager, says strong fourth quarter 2009 sales support optimism in the offshore market going forward for those committed to the space.
"Aviva just never cracked the offshore market. They were not that well established in it and it did not form a massive part of their business.
"We have a much wider distribution including via wraps and our link up with Fidelity, and we see the offshore bond area as being a key component of our wrap offering going ahead. Offshore bonds is still a very vibrant market."
He warns against placing too much emphasis on the decision by the UK's largest insurer to pull out of the space.
"Aviva pulled out of the wrap market and it continued to flourish, so much they decided to re-enter it."
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