DBRS Morningstar says that the Australian securitisation market could hit AUD$100bn in 2026, in part because “Australian securitisation remains attractive for offshore investors because of the country’s historic stability, uncertainty in other markets, and Australia’s increasingly diversified economy and limited direct exposure to US tariffs.” Greg Winterton caught up with Dr. Joshua Funder, CEO and Managing Director of Household Capital, to discuss the current state of and outlook for the reverse mortgage sector of the Australian securitisation market in this month’s Q&A.
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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