The UK’s pension risk transfer (PRT) market saw transactions totalling approximately £50bn in 2023, according to consultants Hymans Robertson. Last year saw eleven deals worth more than £1bn, according to the firm’s Risk Transfer Report, a record for a calendar year. The big deals headline the activity reports for the market, but beneath the surface, there has been a concern among some industry commentators in recent years that the smaller schemes seeking an insurance solution may be left on the sidelines.


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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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