The US asset-intensive life reinsurance (AILR) market has been growing significantly in recent years. Annuity sales have set record after record and that, coupled with the desire to offload legacy blocks of business, such as universal life with secondary guarantees, have seen US carriers look to alternative capital management solutions as their balance sheets evolve.
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.
Post a comment
Related Posts
New Data Shows Typical Life Settlement Covers the Average Cost of Long-Term Care
New data suggests the average life settlement payout to policyholders is over $200,000.
Dutch Longevity Risk Transfer Market Growing as Pension Scheme Transition Deadline Boosts Deal Activity
PRTs in the Netherlands have been steadily increasing since the government passed the Futures of…
The Pursuit of Everlasting Life Unlikely to Shift Actuarial Models
Multiple reasons exist as to why biohacking is unlikely to impact mortality curves.
Shaping the Future of Health Insurance Through Innovation and Analytics
WTW’s Jessica Plewes and Lisa Balboa explore how analytics is tackling health insurance’s biggest challenges…
