Within the life settlement industry, the medical record review has long remained one of the most resource-intensive and time-consuming stages of the process. Even as other aspects of the industry have adopted data-driven solutions, this particular function continues to depend heavily on manual review. Underwriters are often tasked with sorting through thousands of pages of unstructured, inconsistent, and redundant medical information, an endeavor that can delay transactions, increase costs, and limit deal flow.
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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