The US is now the only remaining nationwide secondary market for consumer life insurance policies. That’s because the German Traded Life Policy (TLP) market has gone the way of the Traded Endowment Policy (TEP) market in the UK – i.e., it is now largely defunct. Unlike the TEP market, however, it’s the macroeconomic environment, not the regulatory one, that is responsible for the demise.
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.
Post a comment
Related Posts
New Documentary Shines a Light on the Origins of the Life Settlement Market
Speak to almost any participant in the life settlement secondary market, and they will tell…
UK Pension Risk Transfer Market Driving Increased Interest from North American Investors
The planned acquisition of life insurer Just Group by Canadian investment company Brookfield, announced in…
7,000 Steps Each Day Keeps the Doctor Away. But What Is the Impact on Insurers and Pensions?
The claim that walking 10,000 steps each day makes a significant difference to one’s health…
What the Financial Advisor Community Can Learn from the Life Settlement Market
Life expectancy providers are deeply embedded in the longevity and mortality world, providing insights for…
