2022 provided global investors with one of the most challenging macroeconomic environments in years as higher inflation, rising interest rates and geopolitical instability combined to affect both stock and bond portfolios alike. Life settlements, however, tend to exhibit a low correlation to traditional markets, and Greg Winterton spoke to life settlement asset managers William Corry, Founder and Managing Director, Corry Capital Advisors, Walter Deeter, Co-Founder, Managing Director & Chief Investment Officer, Burdette Asset Management, Patrick McAdams…

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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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