The life settlement market is regulated in 43 US states – Alabama, Missouri, South Carolina, South Dakota, Wyoming being the naysayers (Michigan and New Mexico regulate viatical settlements but not life settlements) – and each state follows one of two model acts, NCOIL or NAIC, or a hybrid of both. Regardless of the model used by a state that regulates the industry, two commonalities are that a licensed life settlement provider must be the purchaser of the life…
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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