In an effort to differentiate between cohort and large population mortality information that predominates most discussions about longevity, life expectancy and other life underwriting-related topics, we have used two different terms. We use the term macro-longevity to refer to information about life expectancy involving large groups of people, the population of the United States for example. We use the term micro-longevity when we talk about the life expectancy (LE) of an individual…
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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