The US sees healthy activity across both of its reverse mortgage securitisation channels. On the agency side, $534m worth of issuance was seen in January this year alone, and parallel to this, the ‘private-label’ or proprietary reverse mortgage market remains robust, with non-agency securitisations of jumbo and specialist loans coming down the pipe regularly.
There is also activity in Canada – Home Equity Bank’s CHIP Mortgage Trust for example – and Australia’s previously moribund market has a new lease of life, thanks to Household Capital’s recent issuance both last year and in 2024.
But despite the maturity and activity in the market, the UK was something of an outlier. While other nations treated equity release/reverse mortgages as a tradable asset class, British insurers treated it as a ‘buy-and-hold’ liability hedge, locked away in the dark corners of their balance sheets, largely due to regulatory capital reasons.
The tide may be turning, however, as green shoots have begun to appear across the sector. Two examples of recent activity in the space include a £750m securitisation of Aviva equity release mortgages in December 2024 and Legal & General preplacing an approximately £500m equity release RMBS in December last year (both arranged by Citi).
But unlike the US model, for example, British insurers in the market arguably don’t need the money because they are well capitalised with billions of pounds of bulk purchase annuity premiums, thanks to the seemingly relentless activity in the defined benefit pensions de-risking market.
So, why do it at all?
“It’s mainly about capital optimisation rather than just raising cash for new loans, which is what happens in other markets,” said Ben Grainger, Partner at EY in London.
“The money from the senior tranches of a securitisation can be used to help cover the pension obligations that insurers are taking on through bulk purchase annuities. In addition, public securitisation allows insurers to sell off the riskier parts, which require more capital.”
And why now?
“The market needed to develop the ability to structure these deals and show which investors would be interested in buying the riskier parts of an equity release securitisation. Insurance companies tend to buy back the safer parts because they meet the capital requirements, but there’s also strong interest from other investors for the riskier parts,” said Grainger.
“Insurance companies buy back the senior tranches because they are matching adjustment compliant as I mentioned, but there has been strong demand from other investors for the mezz and equity tranches.”
This demand is being fuelled in part by the broader macroeconomic environment. As interest rates began their tentative descent in late 2025, the spread on the mezzanine tranches became more attractive to global credit funds looking for a hedge against more traditional corporate debt, for example.
So, the model is now proven, apparently. And there is, arguably, a further regulatory benefit to these deals – by issuing equity release securitisations, the insurers are de-risking as the riskier tranches of the structure are being transferred to capital markets investors as opposed to sitting in the own funds bucket of an insurer’s balance sheet. That’s a good news story for the regulator (and the wider public).
There could be other benefits, too. Despite the drivers of activity being more corporate finance in nature as opposed to business development, it isn’t out of the realms of possibility that this may have a positive impact on the primary market, which itself has just enjoyed a stronger year than in previous ones.
Industry group the Equity Release Council recently published data suggesting that the market grew 11% last year, with total annual lending increasing from £2.3bn in 2024, to £2.57bn in 2025; the emergence of a securitisation market in the UK could provide a tailwind for activity, although it is early days.
“Some firms might be more willing to offer higher loan-to-value products because they have a way to exit through securitisation. If investors show more interest in equity release mortgages, we could see lower rates for consumers, making funding cheaper than keeping everything on their balance sheets. However, there is still some way to go on this,” said Grainger.
There’s more. On 17th February, the PRA published CP2/26 – Reforms to securitisation requirements, a new consultation paper sets out the PRA’s proposed rules and expectations for PRA-authorised firms (which includes many life insurance companies) participating in securitisations. The proposals contained in the consultation paper “aim to make the existing requirements more proportionate and less prescriptive, while still supporting the PRA’s primary objective of maintaining appropriate prudential and general safeguards. The PRA considers that the proposals would facilitate its secondary objectives by lowering compliance costs and aligning securitisation capital requirements with the economic substance which may, over time, enable greater competition and facilitate international competitiveness and growth.”
While the reforms are designed to be helpful to the UK securitisation market in general, if accepted, they will be supportive of UK equity release mortgage (ERM) securitisations in a number of ways.
“In general, the regulators are lowering the barriers for investors through reduced and more flexible due diligence, which should encourage more external investors in ERM securitisations. L-shaped risk retention could allow insurance originators to split their 5% retention between a vertical slice and a first loss tranche, which could provide greater flexibility in managing Solvency II capital charges,” said Neil Hamilton, a Partner at Mayer Brown in London.
“The proposal to treat “similar private scheme loans” with the same risk-sensitivity as Mortgage Guarantee Scheme loans offers a potential way for private insurance-backed ERM portfolios to achieve better capital treatment. The PRA is explicitly aiming to align capital requirements with the economic substance of credit protection, which for ERMs with NNEG [no-negative equity guarantee] risks, may allow for more tailored IRB capital treatment,” he added.
Aviva itself sees the potential for increased securitisation activity as a funding mechanism for primary market origination.
“The demand for equity release is likely to continue to grow as retirees seek to access the wealth in their property. To ensure we are able to meet this demand and to provide the best options for our customers Aviva has used, and will continue to use, a variety of funding sources for our mortgages. This allows us to best align our ERMs to investor appetite. The increasing use of securitisation as a means to create tradable assets is likely to continue as providers seek the most efficient solutions to fund,” an Aviva spokesperson told Longevity and Mortality Investor in an emailed statement.
In the short term, the UK equity release securitisation market could be a billion pounds sterling per year market; although, the size of these deals means that Grainger expects two or three deals a year as insurers go through their back books. But there’s no reason that there couldn’t and shouldn’t be activity each year going forward.
“While it’s likely that after the initial wave of insurers looking to securitise their portfolios, activity may slow to one or two deals a year, that still means half a billion pounds of unique assets entering the capital markets,” he said.
