I need to get something off my chest. I am not a fan of the term insuretech. There, I said it. I can’t help it—lexical pedantry runs in my family. It’s not that I am against the idea of putting technology to productive use in the insurance industry. Rather, it’s because insuretech seems like nothing new. Insurance and technology form a mix that’s over 70 years old. Insurance carriers were among the first companies to use computers when they became commercially…
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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