Life expectancy providers are deeply embedded in the longevity and mortality world, providing insights for life settlement policy buyers in both the secondary and tertiary markets on how long an individual can be expected to live. A consequence of doing this year-in, year-out is the wealth of mortality data we compile: This data, drawn from thousands of predominantly affluent insured individuals, offers nuanced insights into longevity that go far beyond standard actuarial tables.
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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