The Bank of England, through its Prudential Regulation Authority (PRA), has issued a consultation on changes to how funded reinsurance is treated under UK insurance capital rules.
The consultation proposes bringing funded reinsurance more closely in line with the capital treatment applied to other types of investments held by UK life insurers, with the aim of removing what the Bank of England describes as an inconsistency in current regulation.
Funded reinsurance typically involves a UK life insurer paying a significant upfront premium to a reinsurer, often based outside the UK, in return for future payments that help meet long-term policyholder obligations.
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