Retirement planning in the US typically involves discussions around investments such as stocks and bonds, and, for the more affluent, offerings such as hedge funds, private equity, and real estate. But for many Americans, their life insurance policy is their second largest asset, after their home. And many of these life insurance policies meet the criteria for sale in the life settlement market.
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 Research Set to Have Significant Impact on Longevity and Mortality Markets
The average life expectancy of a newborn human in 1900 was 32 years, and according…
Getting Data Right Remains a Challenge in UK Pension Risk Transfer Market
Data is everything and everywhere, from generative artificial intelligence (AI) to supermarket loyalty cards. So,…
UK Smoking Bill Likely to Deliver Only Modest Improvements to Future Life Expectancy
Smoking rates in the UK have been falling since records were first taken in 1974,…
What is the Current State of the Relationship Between ESG and the Longevity and Mortality Markets?
The environmental, social and governance investing movement was, for years, akin to a juggernaut relentlessly…
