On May 17, 2022, a jury verdict rejected claims brought by an executor seeking the proceeds of a $1.5 million life insurance policy in the most recent development in so-called “estate cases” brought under Delaware law. Phoenix Home Life issued the policy in 2006, and the insured used a premium finance loan from LaSalle Bank to pay the first two years of premiums.
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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