The global equity release/reverse mortgage market could be worth $56bn by 2035, according to a new report from EY and industry body the European Pensions and Property Asset Release Group. The Global Equity Release Survey Report, now in its third edition, analyses data received from market leaders across 13 countries internationally across Europe, North America and Australia with established or developing equity release markets and explores their growth potential.
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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