D2 - New risk transfer tools for life insurers
In 2017, the UK set up an Insurance Special Purpose Vehicle (ISPV) regime through The Risk Transformation Regulations 2017, with a view to making the UK a hub for insurance linked securities (ILS) transactions. There has been very little activity with the notable exception of London Bridge Risk Re set up by Lloyd’s of London. The PRA recently committed to making changes to the ILS regime, aiming to bring greater flexibility and speed to the regulatory approval process.
We will:
- explore how life insurers could use the new regime to access capital from, and transfer risks such as longevity, credit, pandemic and lapse to, third party investors.
- give an overview of the ILS market globally and contrast with more traditional risk mitigation techniques such as reinsurance, derivatives and asset securitisation.
- look at Athene Life Re in Bermuda (part of Apollo Global Management) which set up a sidecar and raised $3bn in third party capital commitments in 2019 to support its life and pensions reinsurance business. In 2020 it used its sidecar to support the reinsurance of a $27 billion in-force block of fixed and indexed annuities from Jackson National Life Insurance Company.
Could UK annuity writers adopt a similar model?
Speakers: Albert Shamash and James Isden, KPMG