The Institute and Faculty of Actuaries Continuous Mortality Investigation (CMI) published CMI_2023, its annual update to the CMI Mortality Projections Model in mid-April. The bottom line is that projected life expectancies for those in England and Wales at age 65 are around five weeks lower for males and two weeks lower for females than they were in last year’s update.
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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