The life insurance segment of the insurtech sector continues to see less activity than its non-life cousin. Private markets analytics firm Pitchbook’s Q3 2022 Insurtech Report, published just before Christmas, says that $306.5mn of deals were completed in the first three quarters of 2022 in its health and life segment; property and casualty ($518mn) and Commercial ($503mn) represents the two largest segments by dollar amount through Q3 last year.
Insurers are favouring funded re as it helps firms manage the market and longevity risks associated with writing bulk purchase annuity (BPA) business by reducing capital charges and therefore making PRT deals more competitive.
Unsurprisingly, given its growth and potential for capital optimisation, UK regulators have been carefully watching the increased use of funded re. In June 2023, the Prudential Regulatory Authority (PRA) sent a “Dear CRO’ letter to heads of risk at UK life insurers.
The letter outlined the regulator’s two main concerns from a sectoral review which it had carried out.
“One of the key risks arising in funded re is that firms recapture sub-optimal portfolios with depressed values and with limited ability to be transformed effectively to the firms’ preferred portfolio,” the PRA letter said.
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