The environmental, social and governance investing movement was, for years, akin to a juggernaut relentlessly ploughing its way through all sub-categories of the asset and investment management industry. But in recent years, the media frenzy around ESG has cooled and the movement has even received some level of backlash in some quarters. Greg Winterton spoke to Johan Jonson, Risk Manager at Ress Capital, Dan Knipe, Chief Investment Officer at Kilter Finance and Sarah Nappi, Associate at NorthPeak Advisory…
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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