The US pension risk transfer market got off to a slow start last year, with total PRT sales down 48% year over year compared to the third quarter of 2024. But the fourth quarter is expected to make up for it; Aon’s U.S. Pension Risk Transfer (PRT): Annual Report Preview said that “After a quiet start to the PRT market in 2025, the fourth quarter was exceptionally busy.
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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