The Bank of England’s Prudential Regulation Authority published its annual letter to Chief Executive Officers of PRA-regulated Insurance firms last week, in which it outlined its 2025 priorities for the UK insurance sector.
Of note to the country’s pension risk transfer market will be page three, which features something of a caution to the industry.
“In 2025 we will continue with our focus on funded reinsurance, given the concerns the PRA and the Financial Policy Committee have expressed that the current growth in funded reinsurance transactions could, if not properly controlled, lead to a rapid buildup of risks in the sector and have the potential to pose systemic risks,” says the letter, authored by Gareth Truran, Executive Director, Insurance Supervision and Shoib Khan, Director, Insurance Supervision.
“In July 2024, we published in supervisory statement (SS)5/24 – Funded reinsurance our expectations on UK firms’ use of funded reinsurance. Firms’ self-assessments show that they are not yet fully meeting our supervisory expectations. In many cases remediation plans are in place, but we judge that further work is likely to be required.”
This year is set to be another busy one in terms of regulation for the UK life insurance sector, with the previously announced Life Insurance Stress Test to happen this year; the PRA expects to publish the results in the fourth quarter.
