Alternative investments industry body the Standards Board for Alternative Investments (SBAI) sets industry standards and maintains several asset-class specific ‘toolboxes’, designed to provide asset managers and investors active in those markets with guidance documents specific to their needs. Greg Winterton spoke to Thomas Deinet, Executive Director at the SBAI, to learn more about their work in the insurance-linked space, ESG, and alternative credit more broadly.
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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