Skip to main content
The Actuary: The magazine of the Institute and Faculty of Actuaries - return to the homepage Logo of The Actuary website
  • Search
  • Visit The Actuary Magazine on Facebook
  • Visit The Actuary Magazine on LinkedIn
  • Visit @TheActuaryMag on Twitter
Visit the website of the Institute and Faculty of Actuaries Logo of the Institute and Faculty of Actuaries

Main navigation

  • News
  • Features
    • General Features
    • Interviews
    • Students
    • Opinion
  • Topics
  • Knowledge
    • Business Skills
    • Careers
    • Events
    • Predictions by The Actuary
    • Whitepapers
  • Jobs
  • IFoA
    • CEO Comment
    • IFoA News
    • People & Social News
    • President Comment
  • Archive

Topics

  • Data Science
  • Investment
  • Risk & ERM
  • Pensions
  • Environment
  • Soft skills
  • General Insurance
  • Regulation Standards
  • Health care
  • Technology
  • Reinsurance
  • Global
  • Life insurance
Quick links:
  • Home
  • The Actuary Issues
  • February 2016
02

Solvency II: PRA warns firms against using reinsurance to ease capital demands

Open-access content 18th February 2016

Life insurers should not transfer longevity risk to reinsurers in an attempt to lower capital requirements under Solvency II, according to the Prudential Regulation Authority (PRA).

2


Andrew Bulley, director of life insurance at the PRA, said it was a common practice for firms to reinsure themselves against the risk of people living longer.

However, Solvency II potentially gives an additional incentive for them to do so in order to ease the requirement to hold capital, he added.

Speaking at an event organised by the Investment and Life Assurance Group, in London, Bulley said the PRA would keep an eye on longevity risk deals. 

"We will be monitoring closely if firms become active in this market consistently and solely for reasons other than seeking genuine risk transfer," he said. 

He warned such transfers may not be completely safe, adding: "Should an insurer transfer risk to a single or small number of reinsurers, it inherently exposes itself to counterparty credit risk and, potentially, substantial concentration risk."

Bulley said he, and his counterpart on general insurance, Chris Moulder, sent a letter to directors on 9 February. According to the letter, the PRA expects to be notified of proposed longevity risk transfer and hedge transactions and the firm's recommended approach to risk management "well in advance of a firm completing such a transaction".

He also mentioned the PRA approved 19 internal model applications from UK firms at the end 2015, but expected to see a "second wave" of model applications this year. 

He added: "For those who do not have an internal model but are looking to make an application over the course of this year, the PRA will endeavour to make the model review process as smooth and transparent as possible through providing timely and comprehensive feedback, just as we did in 2015 and before that."

Meanwhile, the PRA has published an updated supervisory statement which sets out how it expects firms to submit information using product reporting codes when applying to use an internal model or partial internal model.

This article appeared in our February 2016 issue of The Actuary.
Click here to view this issue
Filed in:
02
Topics:
Reinsurance
Share
  • Twitter
  • Facebook
  • Linked in
  • Mail
  • Print

Latest Jobs

Pensions De-Risking Associate (Start-Up)

London (Central)
Market salary, bonus & benefits
Reference
119876

Head of Proposition Development

London/Reading/Birmingham/West Midlands
Generous salary, bonus and benefits
Reference
119875

Capital Reporting Manager

£70000 - £100000 per annum
Reference
119930
See all jobs »
 
 
 
 

Sign up to our newsletter

News, jobs and updates

Sign up

Subscribe to The Actuary

Receive the print edition straight to your door

Subscribe
Spread-iPad-slantB-june.png
​
FOLLOW US
The Actuary on LinkedIn
@TheActuaryMag on Twitter
Facebook: The Actuary Magazine
CONTACT US
The Actuary
Tel: (+44) 020 7880 6200
​

IFoA

About IFoA
Become an actuary
IFoA Events
About membership

Information

Privacy Policy
Terms & Conditions
Cookie Policy
Think Green

Get in touch

Contact us
Advertise with us
Subscribe to The Actuary Magazine
Contribute

The Actuary Jobs

Actuarial job search
Pensions jobs
General insurance jobs
Solvency II jobs

© 2020 The Actuary. The Actuary is published on behalf of the Institute and Faculty of Actuaries by Redactive Publishing Limited, Level 5, 78 Chamber Street, London, E1 8BL. Tel: 020 7880 6200