The life contingent structured settlement (LCSS) market in the United States began in the early 1980s with the enactment of the Periodic Payment Act of 1982 but it remains a niche investment opportunity, despite the potential size of the market. Greg Winterton spoke with Mike Fasano, Founder, Fasano & Associates; Fred Love, President and General Counsel at Sutton Park Capital; and Jason Sutherland, CEO at DRB Capital, to get their views on the current state of…
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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