In early November last year, industry group the American Council of Life Insurers (ACLI) published its annual Life Insurers Fact Book, the organisation’s deep dive into a range of sub-categories of the US life insurance industry. Last month, we looked at 2022’s developments in surrenders, new business and solvency; this month, we’re taking a look at the US life insurance market as a whole: Its health; size and outlook.

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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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