BoE to curb offshore life insurance trades

Wed, 29th Apr 2026 14:22

LONDON, April 29 (Reuters) - The Bank of England's regulatory arm on Wednesday set out plans to tighten the capital treatment of funded reinsurance, a type of deal ‌in which life insurers pass on risk to offshore reinsurers.

British life insurers will have to increase the ⁠amount of capital they hold against these transactions to ⁠about 10%, up from about 2% to 4% currently, the Prudential Regulation Authority said.

* The move is the latest step by the Bank of England to address risks arising from the growing links between private investors and the banks and insurers ‌it regulates.

* Funded reinsurance has been growing rapidly, with the PRA estimating current exposure of UK firms at around 40 billion pounds ($54 billion), and is expected to grow to 100 billion pounds over the next decade.

* Offshore reinsurers are increasingly backed by private equity. Firms including Apollo, KKR, CVC and Carlyle are among those that have expanded into the sector.

* Large UK life insurers ‌include Aviva, Legal & General and Standard Life

* The regulator has concluded the current approach underestimates the risks and unduly favours funded reinsurance structures ‌over other similar exposures.

* "We want to act now to correct this imbalance before it grows to pose more material risks across the sector," said Gareth Truran, an executive director at the BoE.

* The regulator has previously described the regulatory treatment of funded reinsurance as a “quirk” and said the deals appear ‌to be driving investment away from assets that support the UK economy and instead towards internationally based reinsurers.

* The UK is not the only jurisdiction examining the growing ties between private investors ⁠and insurance, ⁠with regulators in Europe and the United States also scrutinising reinsurance.

* ‌The PRA's proposals will be put to a consultation with responses requested by July 31. The changes would apply to deals completed from October this year.

* Huw Evans, UK head of insurance at KPMG, ‌said: “The PRA has gone further than its global peers in regulating funded reinsurance....Insurers may question this departure from the principles-based framework and the wider growth agenda."