PRA is consulting on its proposed expectations when life insurers enter into or hold funded reinsurance arrangements as cedants. It feels it needs to set out these expectations to advance its primary objectives by addressing the risks these practices pose to them while allowing the life insurance industry still to use the arrangements. It proposes a new Supervisory Statement which covers:
- ongoing risk management of funded reinsurance arrangements;
- modelling of the solvency capital requirement associated with these arrangements; and
- how firms should consider structuring their arrangements.
Consultation closes on 16 February 2024 and PRA would like to make the changes during Q2 2024.