PRA sets expectations for firms’ funded reinsurance arrangements

The PRA set out its final policy on funded reinsurance in Supervisory Statement 5/24 (SS5/24) on 26 July 2024. Alongside SS5/24, the PRA issued a letter to the CEOs of life insurers. The letter details the PRA’s implementation approach for SS5/24, and the approach for the self-assessment against SS5/24 that it expects insurers to perform.

The PRA is concerned that the current growth in funded reinsurance transactions by UK life insurers, if not adequately controlled, could lead to a rapid increase of risks in the sector. The PRA’s expectations in SS5/24 therefore come into effect immediately, and apply to UK Solvency II life insurers and insurers that have a UK branch that are considering or already holding funded reinsurance arrangements as cedants.

The PRA expects insurers to perform a self-assessment against the expectations of SS5/24, and to provide the results to their PRA supervisor by 31 October 2024. The PRA will use the results from insurers to inform its supervisory engagement with individual firms. Download this Hot Topic to see our summary of the PRA’s final policy on funded reinsurance, and what this means for insurers.