Author: Michael Abramson and Lara Desay
On 15 June 2023 the Prudential Regulatory Authority (PRA) published a letter to bulk annuity insurers regarding their use of funded reinsurance. In this note we seek to help pension schemes understand what funded reinsurance is, its relevance to them, and what the PRA has concluded. Funded reinsurance is akin to a bulk annuity insurer doing its own buy-in behind the scenes. The insurer takes a portion of the buy-in/buy-out premium received from the pension scheme and passes it on to a reinsurer, often but not necessarily overseas. The reinsurer is then on the hook for providing monthly benefit payments to…