Investors in the life settlement industry’s secondary market work with a provider to source policies; indeed, most states that have a regulatory regime for the asset class require a life settlement provider to be involved in the transaction. Those providers in turn source their policies either through the ‘direct to consumer’ channel – so, advertising on television, radio, in newspapers, or online – or through brokers who sell an insured’s life insurance policy on…
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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