Resolution Re secures first funded pension reinsurance transaction
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Resolution Re, the Bermudian reinsurance unit of Resolution Life, has entered into the UK pension risk transfer market with its first funded reinsurance agreement.
The transaction reinsures longevity and asset risks associated with UK pension liabilities of an unnamed UK insurer. Under the terms of the agreement, Resolution Re will reinsure pension liabilities covering both pensions in payment and deferred pensions.
The company said: “This extends Resolution Life’s position as a leading global manager of in-force life insurance businesses, with over 4m policies in force, supported by our operational and digital administrative capabilities that enable better customer experiences.”
Funded reinsurance is a relatively new concept. In the UK, the Prudential Regulation Authority has repeatedly raised concerns about it.
The regulator has a particular focus on recapture risk, where a ceding company takes back risks that were previously ceded to a reinsurer.
In a thematic review released in June, the PRA revealed “material shortcomings” in the way re/insurers manage the risks arising from funded reinsurance and asked firms to review their risk management practice.
However, Resolution Re said it had worked closely with its regulator in Bermuda to develop a structure that can provide capacity to UK PRT writers “in a sustainable way that considers the interests of all stakeholders, including insurers and regulators”.
Resolution Re was advised on the transaction by the London offices of Eversheds Sutherland (International) and Hymans Robertson.
Why is funded reinsurance attractive to primary insurers?
